Bombay High Court
The Chamber Of Tax Consultants Through … vs Director General Of Income Tax … on 24 January, 2025
Author: M. S. Sonak
Bench: M. S. Sonak
2025:BHC-OS:1128-DB
Revati 9.PIL.32465.24.docx
SAYYED Digitally signed
by SAYYED IN THE HIGH COURT OF JUDICATURE AT BOMBAY
SAEED SAEED ALI
ALI AHMED ALI
ORDINARY ORIGINAL CIVIL JURISDICTION
AHMED Date:
2025.01.24
ALI 17:13:15 +0530
PUBLIC INTEREST LITIGATION (L) NO.32465 OF 2024
1. The Chamber of Tax Consultants
through its President
Mr. Vijay Bhatt
having its office at 3, Rewa Chambers,
Ground floor, 31, New Marine Lines,
Mumbai-400020.
2. Nidhi Dipen Tann
an individual resident of India,
aged 36 years, Chartered Accountant
by profession, residing at
B-1604, Aditya Pearl,
P H Purohit Lane,
Ramwadi, Kalbadevi,
Mumbai-400002.
3. Abhishek Nareshkumar Jain,
an individual resident of India,
aged 29 years a salaried employee,
residing at Room No.509/510,
5th floor, Shankeshwar Darshan,
Love Lane, behind Mazgaon
Telephone Exchange, Byculla,
Mumbai-400010
4. Dimple Kumari,
an individual resident of India,
aged 32 years, Architect by
profession, residing at
Room No.509/510, 5th floor,
Shankeshwar Darshan,
Love Lane, behind Mazgaon
Telephone Exchange, Byculla,
Mumbai-400010 ...Petitioners
Versus
1. Director General of Income
Tax (systems)
having his office at Ground floor,
1 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
Ara Centre, E-2, Jhandewal Extension,
New Delhi-110055.
2. Director of Income Tax,
Centralised processing Centre,
Bengaluru,
Income Tax Department,
Bengaluru, Tax Department,
Bengaluru - 560500.
3. Principal Chief Commissioner
of Income-tax, Mumbai,
Aayakar Bhavan, M. K. Road,
Mumbai-400 020
4. The Central Board of Direct Taxes
Department Of Revenue,
Ministry Of Finance,
Government Of India,
North Block, New Delhi-110 001
5. Union Of India
Through The Secretary,
Department Of Revenue,
Ministry Of Finance,
Government Of India,
North Block, New Delhi-110 001. ...Respondents
_____________________________________________________________
Mr. Percy J Pardiwala, Senior Advocate a/w Mr. Dharan V. Gandhi for
the petitioners.
Mr. N Venkatraman ASG (through VC) a/w Mr. Akhileshwar Sharma
a/w Mr Abhishek Mishra for the respondent.
_____________________________________________________________
CORAM : M. S. Sonak &
Jitendra Jain, JJ.
RESERVED ON : 16 January 2025
PRONOUNCED ON : 24 January 2025
JUDGMENT (Per Jitendra Jain J):
–
1. Rule. The Rule is made returnable immediately at the request
2 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
of and with the consent of the learned counsel for the parties.
2. This Court, led by the learned Chief Justice on 20 December
2024, granted interim relief by directing the Central Board of Direct
Taxes to issue notification for extending the due date for e-filing of the
income-tax return to ensure that taxpayers eligible for the rebate under
Section 87A are allowed to exercise their statutory rights without facing
procedural impediments. Pursuant to the said direction, the Board
issued a notification on 31 December 2024 extending the last date for
furnishing returns under Section 139(4)/139(5) for the assessment year
2024-25 in the case of a resident individual from 31 December 2024 to
15 January 2025. Thereafter, on the matter being mentioned, an
administrative order dated 10 January 2025 was passed assigning the
said PIL to this Bench.
PETITIONERS :
3. The Chamber of Tax Consultants files this Public Interest
Litigation (PIL) against the respondents through its President and
taxpayer assessees. Petitioner No.1 is a society registered under the
Societies Registration Act of 1860 and the Bombay Public Trusts Act of
1950. It has more than 3800 members comprising of Advocates,
Chartered Accountants, and tax practitioners.
4. The objectives of petitioner No.1 are (i) to spread education
in matters relating to tax laws and other laws and accountancy and
3 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxallied subjects of professionals’ interest; (ii) to carry on activities for the
extension of knowledge in the fields of tax laws and other laws,
accountancy and allied subjects of professionals’ interest; (iii) to make
representations to any government or non-government authority,
committees, commissions and study teams, or at conferences or similar
gatherings, (iv) to seek representation and appear before the tax and
other law enforcement authorities, tribunals and courts in matters of
public interest and in cases of importance to professionals and assessees
in general, including taking up and pursuing public interest litigation.
5. Petitioners Nos. 2 to 4 are taxpayers and assessees under the
Income-tax Act, 1961 (the Act). They are aggrieved by the subject
matter of the petition and have joined petitioner No.1 in filing the
present petition.
6. Petitioner No.1 has in the past filed several writ petitions to
pursue the common cause affecting the administration of tax in India. It
is in this background that the present PIL is filed jointly.
CAUSE OF PIL :
7. The cause for filing the present PIL arose on 5 July 2024. On
that date, online utility provided by the respondents denied the
assessees (who are clients of the members of the petitioner No. 1), the
benefit of claiming a rebate under Section 87A of the Income-tax Act for
4 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxthe assessment year 2024-25 while filing online return against tax
computed under various sections of Chapter XII of the Act. Before 5 July
2024, the respondents’ utility permitted the assessees to make such a
claim. Petitioner No.1 and various other associations made various
representations to respondents on the issue of utility not providing for
making a claim under Section 87A but, having failed to get justice, have
approached this Court for redressal of their grievances. It is this denial
on account of the modification of the utility on and from 5 July 2024,
which is challenged in the present petition.
PRAYERS SOUGHT FOR :
8. The prayers sought for in the Writ Petition read as under:-
(a) that this Hon’ble Court be pleased to issue a writ of
mandamus or a writ in the nature of mandamus or any other
appropriate writ, direction or order directing the Respondents
to modify the utilities for filing of the return of income under
section 139 of the Act immediately, thereby allowing
assessees to make a claim of rebate under section 87A of the
Act read with the proviso to section 87A, in their return of
income for the AY 2024-25 and subsequent years including
revised returns to be filed under section 139(5) of the Act.
(b) that this Hon’ble Court be pleased to issue a writ of
mandamus or a writ in the nature of mandamus or any other
appropriate writ, direction or order directing the Respondents
to allow assesses to file a manual return of income for
claiming rebate under section 87A of the Act in their return of
income for the AY 2024-25 and subsequent years including
revised returns to be filed u/s 139(5) of the Act.
[ (c) that this Hon’ble Court be pleased to issue a writ of
mandamus or a writ in the nature of mandamus or any other
appropriate writ, direction or order directing the Respondents
to make the utilities for filing the return of income online
flexible so as to allow an assessee to self compute his/her
income and there should not be any restriction on making of
any claim whatsoever and to direct the Respondents to not
5 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
release any utilities or make any changes in the utilities for
filing of the Return of Income under section 139 of the Act
which does not allow any assessee to raise any claim which it
seeks to make/ raise in the return of income.
(d) that this Hon’ble Court be pleased to issue a writ of
mandamus or a writ in the nature of mandamus or any other
appropriate writ, direction or order and be pleased to direct
the Respondents to:
(i) take appropriate steps to allow a claim of rebate under
section 87A of the Act from tax payable at special rates
except tax levied in accordance with section 112A of the
Act, where the assessees have opted for the new tax
regime enacted in section 115BAC of the Act, for those
assessees who could not claim such relief in their
returns already filed for the AY 2024-25 and to issue
consequential refund in this regard.
(ii) take appropriate steps to allow a claim of rebate under
section 87A of the Act from tax payable at special rates
except tax levied in accordance with section 112A of the
Act, where the assessees have opted for the new tax
regime enacted in section 115BAC of the Act, for those
assessees who have made claim of such relief in their
returns already filed for the AY 2024-25 and where such
returns are yet to be processed.
(iii) withdraw or modify the intimations already issued
under section 143(1) of the Act processing the return of
income, denying the claim of rebate under section 87A
of the Act, from tax payable at special rates except tax
levied in accordance with section 112A of the Act,
where the assessees have opted for the new regime
enacted in section 115BAC of the Act and to direct the
Respondents to allow such claim.
(e) that this Hon’ble Court be pleased to issue a Writ of
Prohibition or any other Writ, Order or Direction in Article
226 of the Constitution of India ordering and directing the
Respondents not to implement the intimations already issued
under section 143(1) of the Act processing the return of
income, denying the claim of rebate under section 87A of the
Act from tax payable at special rates except tax levied in
accordance with section 112A of the Act.
(f) that pending the hearing and final disposal of this petition
the Respondents, their subordinates, servants and agents be
6 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
directed by an order of this Hon’ble Court:
(i) to change the utilities for filing of the Return of Income
under section 139 of the Act immediately and forthwith
allowing assessees to make a claim of rebate under
section 87A of the Act in their return of income for the
AY 2024- 25 and subsequent years including revised
returns to be filed u/s 139(5) of the Act.
(ii) To restore the utility which was available before
05.07.2024 for filing return of income which allowed
assessees to make a claim of rebate under section 87A of
the Act in their return of income for the AY 2024-25 and
subsequent years including revised returns to be filed
under section 139(5) of the Act;
(iii) Or in the alternate, to allow filing of a manual return of
income for claiming rebate under section 87A of the Act
in the return of income for the AY 2024-25 and
subsequent years including revised returns to be filed
under section 139(5) of the Act.
(g) that pending the hearing and final disposal of this petition the
Respondents, their subordinates, servants and agents be
restrained by an order and injunction of this Hon’ble Court
from implementing the intimations already issued under
section 143(1) of the Act processing the return of income,
denying the claim of rebate under section 87A of the Act from
tax payable at special rates except tax levied under section
112A of the Act.
SUBMISSIONS OF THE PETITIONERS:
9. Mr. Pardiwala, learned senior counsel appearing for all the
petitioners, led the attack and made various submissions and, on our
request, has filed written submissions, which are reproduced herein:
“For the sake of ease, the present submission is divided into two parts as under:
A. The Tax Department should make the utilities for online filing of
return of income flexible so as to allow an assessee to self- compute
his/her income and there should not be any restriction on making of
any claim whatsoever. The Department cannot design the return as
per their understanding of the law, so as to not allow an assessee
from raising any claim in the return of income to be filed.
B. Rebate under the proviso to section 87A of the Income-tax Act, 1961,
(‘the Act’), is also allowable from tax payable at special rates except
7 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
tax levied in accordance with section 112A of the Act, where an
assessee has opted for the new tax regime enacted in section 115BAC
of the Act.
A. Larger issue of flexibility in filing return of income
1. Under the Act, there is a concept of self-assessment. An assessee has to
compute his own income, determine the tax liability thereon, pay such
tax and then, file his return declaring his total income and the tax on
such income. The same is demonstrated hereunder:
i) As per section 207 and 208 of the Act, an assessee is required to pay
tax in advance in the previous year relevant to the assessment year.
As per section 209 and 210 of the Act, an assessee has to estimate his
current income and then calculate the amount of advance tax to be
paid in installments as provided for in section 211 of the Act. On
failure to pay advance tax as per the provisions of the Act, an assessee
is saddled with interest u/s 234B and 234C of the Act.
ii) Section 139 of the Act requires, inter alia, an assessee to furnish a
return of his income in the prescribed form. Further, an assessee has
to verify his return of income in the manner prescribed.
iii) The verification clause of any return form states as under:
“I,________, son/ daughter of solemnly declare that to the best of my
knowledge and belief, the information given in the return is correct
and complete and is in accordance with the provisions of the Income-
tax Act, 1961. I further declare that I am making this return in my
capacity as ________ and I am also competent to make this return
and verify it. I am holding permanent account number.”
Thus, an assessee has to declare in the return that the return filed is
to the best of his knowledge and belief and is correct and complete
and is in accordance with the provisions of the Act.
iv) Section 140A of the Act the heading of which is “Self- Assessment”,
requires an assessee to pay tax with interest payable under the Act
before furnishing the return of income and the return is to be
accompanied with the proof of payment of such self-assessment tax.
Such furnishing of proof is now dispensed with under the e-filing
regime.
v) Without paying self-assessment tax, a return of income cannot be
filed. Such return is also treated as defective in terms of section
139(9) of the Act.
2. The above provisions demonstrate that under the Act, an assessee is
required to self-compute the income and the tax liability thereon as
per his belief and understanding. Thus, the form of the return of
income has to allow an assessee to declare and compute his income
as per his belief and understanding.
3. The term “return” in the context of the Act refers to the act of
reporting information to the government. By filing an income tax
8 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
return, the taxpayer is “returning” or reporting their taxable income
and tax liabilities to the government.
4. Moreover, in the return of income, an assessee also claims refund of
taxes paid where the taxes paid are more than the taxes required to
be paid. A return, therefore, is also a claim for refund under the Act,
where taxes have been paid in excess of what is required to be paid.
5. This Hon’ble Court in case of Samir Narain Bhojwani vs. DCIT
[(2020) 115 taxmann.com 70 (Bombay)], has held in para 8 as
under:
“The purpose and object of e-filing of return to have simplicity and
uniformity in procedure. However, the above object cannot in its
implementation result in an assessee not being entitled to make a
claim of set off which he feels he is entitled to in accordance with the
provisions of the Act. The allowability or dis-allowability of the claim
is a subject matter to be considered by the Assessing Officer. However,
the procedure of filing the return of income cannot bar an assessee
from making a claim under the Act which he feels he is entitled to.
We accept the Assessing Officer’s submission that in terms of Rule 12
of the Rules, the returns are to be filed by the petitioner only
electronically and he is bound by the Act and the Rules, thus cannot
accept the paper return. However, in terms of section 139D of the
Act, it is for the CBDT to make rules providing for filing of returns of
income in electronic form. This power has been exercised by the
CBDT in terms of Rule 12 of the Rules. However, the form as
prescribed do not provide for eventuality that has arisen in the
present case and may also arise in other cases. Thus, this is an issue
to be brought to the notice of the CBDT, which would in case it finds
merits in this submission, issue necessary directions to cover this
gap.”
6. Similarly, the Hon’ble Allahabad High Court in CIT vs. N. Khan and
Bro. reported in [1973] 92 ITR 338 (Allahabad), has held in para 3 as
under:
“Now, under section 139(1) a duty is cast upon every person to file a
voluntary return if his income exceeds the maximum amount which is
not chargeable to income-tax. The question arises as to which income
is contemplated by this provision, the income which the assessee
believes to be his income or which is finally assessed by the Income-
tax Officer. It is clear that at the time when a person is required to file
a voluntary return, no assessment has yet been made against him. He
is thus to be guided by what he himself believes to be his income. It is
possible and it happens very frequently that an assessee may not
consider a particular item to be his income and yet the Income-tax
Officer may hold otherwise. In such a case, if what he considers to be
his income is less than the amount which is not chargeable to income-
tax, he is not required to file a voluntary return even if the income
finally assessed is more than the maximum amount which is not9 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxchargeable to income-tax. Of course, the belief of the assessee must
be bona fide”
7. Similar view has been taken by the Hon’ble Supreme Court in case of
CIT vs. Ranchhoddas Karsondas reported in [1959] 36 ITR 569 (SC).
It has held as under:
“It is a little difficult to understand how the existence of a return can
be ignored, once it has been filed. A return showing income below
the taxable limit can be made even in answer to a notice under
section 22(2). The notice under section 22(1) requires in a general
way what a notice under section 22(2) requires of an individual. If a
return of income below the taxable limit is a good return in answer to
a notice under section 22(2), there is no reason to think that a return
of a similar kind in answer to a public notice is no return at all. The
conclusion does not follow from the words of section 22(1). No
doubt, under that sub-section only those persons are required to
make a return, whose income is above taxable limits, but a person
may legitimately consider himself entitled to certain deductions and
allowances, and yet file a return to be on the safe side. He may show
his income and the deductions and allowances he claims. But it may
be that on a correct processing his income may be found to be above
the exempted limit. No doubt, it is futile for a person not liable to tax
to rush in with a return, but the return in law is not a mere scrap of
paper. It is a return, such as the assessee considers represents his true
income.”
8. Thus, an assessee has to file his return of income and declare his
income to the best of his knowledge, understanding and belief and
declare such return to be correct and true. Such a process is possible
only if the return permits an assessee with the flexibility to make
whatever claims he feels he can make under the Act.
9. Section 295(2)(i) of the Act, empowers the Government to provide
for rules or form and manner in which return may be furnished. The
Government has prescribed rule 12 in this regard. Various Forms have
been notified by the Government for filing of return of income. This is
an annual exercise. There are various line items in the form and a
corresponding cell to fill in the figures. It is submitted that the
Department is not even empowered under the Act and the Rules to
design a return in a fashion to disallow an assessee from making any
claim. Neither the provisions of the Act, nor the provisions of the
Rules, nor the Forms per se, prohibit or restrict an assessee from
making any claim or restricting an assessee from putting any figure in
the form. Thus, when the utility designed by Respondent No. 1 puts
such fetters, the same is ultra vires the Act, Rules and the Forms
notified.
10. It is submitted that vide rule 12(4), the role of Respondent No. 1 has
been specified. It states “The Principal Director-General of Income-tax
(Systems) or Director General of Income-tax (Systems) shall specify
10 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
the procedures, formats and standards for ensuring secure capture
and transmission of data and shall also be responsible for evolving
and implementing appropriate security, archival and retrieval policies
in relation to furnishing the returns in the manners (other than the
paper form) specified in column (iv) of the Table in sub-rule (3) and
the report of audit or notice in the manner specified in proviso to sub-
rule (2).”
Thus, the role of Respondent No. 1 is to only “ensure secure capture
and transmission of data and for evolving and implementing
appropriate security, archival and retrieval policies” in relation to
furnishing the returns. It can in no manner prescribe a utility which
prohibits or debars an assessee from making any claim in the return
of income. This is irrespective of the fact that the claim made by an
assessee may not be in accordance with the interpretation placed by
the Tax Department on a statutory provision. Thus, when Respondent
No. 1 designs a utility in a manner which is not allowing an assessee
to make a claim under the Act, then, the said action is clearly
contrary to the provisions of the Act read with the Rules.
11. It is submitted that a return cannot be designed in a fashion which
prevents an assessee from making any claim of his/her choice. That is
not the purpose of a return of income. The Respondents cannot
design a return of income, based on their understanding of law. By
not allowing an assessee to make a claim and thereby seeking from
an assessee more tax than what he thinks is liable to pay, would
violate the fundamental rights guaranteed under Article 14 of the
Constitution of India. An assessee in such case, is compelled to show
income which he does not believe to be correct and determine the tax
liability which he does not believe to be correct and pay higher
amount of tax and still declare and verify that the return is correct.
Such an action is manifestly arbitrary and irrational and therefore,
violative of Article 14 of the Constitution of India.
12. In fact, it even lead to treatment of equals as unequal’s. There are
several instances where the Department does not agree with the view
of the assessees taken in the return of income and make additions in
the course of assessment proceeding. The return does not prohibit
assessees from making the claim. However, when a particular
assessee wants to make a claim in the return, which the system
prohibits because as per the Department such claim is not
maintainable, then he is being discriminated against as compared to
the first assessee. This itself demonstrates violation of Article 14.
13. Further, it is submitted that such an action of the executive is also
violative of Article 19(1)(g) of the Constitution of India which
guarantees a citizen with a right to practice any profession or to carry
on any occupation, trade or business. Such a fundamental right
inherently includes a right to have a fair process to declare income
under the Act and to pay correct tax, as per the understanding of the
11 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
assessees. This is especially when the law requires an assessee to self-
declare his income and tax liability.
14. Moreover, such an exercise of not allowing an assessee to make a
claim in the return of income is violative of Article 265 of
Constitution of India. Not following the concept of self-assessment
and self- computation, by not allowing an assessee to make a claim of
his choice, the Revenue would collect more tax than required, which
would be violative of Article 265. Thus, the action of the Respondent
No. 1 in not allowing an assessee to make a claim in the return of
income per se, would be violative of Article 265 of the Constitution of
India.
15. If a return of income prohibits an assessee from making a claim, then,
it would amount to deciding the issue at the stage of filing return of
income itself. The validity of such claim can be tested at the stage of
assessment proceeding and if rejected, by agitating the matter
through various appellate stages. Because of an interpretation of the
Tax Department, it would be imperssible to not allow an assessee to
make a claim in the return of income. The validity of a claim can be
tested by an adjudicating or appellate authority including courts and
tribunals. If an assessee is not allowed to make a claim per se because
the Tax Department feels such a claim is not correct as per their
interpretation, then, there is no requirement for appellate courts to
exist. In fact, reference is made to the following provisions which
show that, there are provisions to ensure that an assessee has not
understated his income:
i) Section 143(1)(a) empowers the Respondent to make adjustments
in the total income as disclosed in the return of income.
ii) Section 143(2) empowers the Respondent to select a case for
scrutiny to ensure that the assessee has not understated the income
or has not computed excessive loss or has not under- paid the tax in
any manner. Such a notice is followed by an order of assessment
either under section 143(3) or section 144 of the Act wherein the
Assessing Officer shall, by an order in writing, make an assessment of
the total income or loss of the assessee, and determine the sum
payable by him or refund of any amount due to him on the basis of
such assessment.
iii) Section 147 of the Act empowers an Assessing Officer to reopen
an assessment if any income chargeable to tax has escaped
assessment.
Thus, there are provisions to verify the correctness of the return of
income filed by an assessee. Such verification or assessment should
take place after a valid return of income is filed. By not allowing an
assessee to make a claim in the return of income, the assessment
process is given a goby and a suo moto determination made at the
stage of filing of the return, which concept, is completely alien to the
Act.
12 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
16. Moreover, if an assessee is not allowed to make a claim in the return
of income, then, he would not be able to raise such a claim thereafter.
If his case is not selected for scrutiny by issuance of a notice under
section 143(2) of the Act, then, there is no remedy for making a
claim. An assessee can probably opt for revision in terms of section
264 of the Act, of the intimation issued under section 143(1) of the
Act by raising a new claim. However, in such revision proceeding, the
Department is of the view that a new claim which is not raised in the
return of income cannot be allowed to be raised for the first time.
Thus, an assessee would be remediless if the revenue’s contention is
upheld. If an assessee’s case is selected for scrutiny assessment, then,
he cannot raise a claim for the first time in such assessment
proceeding, as the Hon’ble Supreme Court in case of Goetze (India)
Ltd. vs. CIT reported in [2006] 284 ITR 323 (SC) has held that no
fresh claim can be raised other than by filing a revised return. Thus, it
is imperative to allow an assessee to make whatever claim he wishes
to make in the return of income and the utility should be designed in
a fashion to allow the same. In fact, the judgment in the case of
Goetze (supra) itself suggests that a claim has to be validly made in
the return of income and by no other mode.
17. It is submitted that by not allowing an assessee to raise a claim in
return, an assessee is denied a fundamental right to agitate an issue.
This clearly amounts to violation of Article 14, 19(1)(g) and 265 of
the Constitution of India.
18. It is submitted that in similar facts, this Hon’ble Court has allowed
assessees to file a manual return by making a claim which was not
available in the return to be filed online when the revenue refused to
accede to the assessee’s request to modify the utility. The Petitioners
have relied upon the orders of this Hon’ble Court in the case of Samir
Bhojwani (supra) and in case of Lupin Limited vs. DCIT in WP No.
3565 of 2023 (order dated 26.03.2024). In fact, similar view is taken
by this Hon’ble Court in Tata Sons Pvt. Ltd. vs. DCIT [WP No. 3109 of
2022 and 1296 of 2023] vide order dated 26.03.2024. The Ld. ASG
had submitted to the contrary that in case of Tata Sons (supra), the
assessee therein had withdrawn the writ petition.
19. The Ld. ASG argued that the returns cannot be modified to suit
particular assessees view and that if anyone has any problem in filing
of return of income, then, he can come to a Writ Court. Further, he
argued that the Writ Court would decide whether the claim of the
assessee is tenable or not and then, would decide whether he can
make such claim in the return of income. Such an approach, it is
humbly submitted, is never contemplated in law. Apart from the fact,
that the Courts are already burdened with pending litigation, to ask a
Writ Court to decide the issue even before such issue is ripe for
consideration by an appellate court would be a travesty of justice. It
is submitted that even so often various Courts hold that a person
13 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
should not jump the queue, and that adjudication should be followed
by the appellate process of CIT(A) and Tribunal and, only then, the
matter should come to a High Court for consideration. Such a process
is given a go by the Department by not allowing an assessee to make
a claim and thereby, forcing such assessee to argue before this
Hon’ble Court about the tenability of its claim so as to allow him to
make such a claim in the return. Such a process, it is humbly
submitted can be avoided, by a simple solution that the Department
should allow an assessee to make a claim in return of income as per
his choice and, then, to decide the tenability of such claim during the
assessment proceeding.
20. In the affidavit in reply (without prejudice to our contention that the
affidavit is filed by CPC, which is not the authority to deal with the
designing of return of income and filing of return of income), from
para 5, it can be deduced that the designing of return of income these
days is based on the processing under section 143(1) of the Act.
While the Petitioners are not in any manner suggesting that one
should revert to a manual system and are not denying the inherent
advantage of a faster processing of the return of income and faster
release of refunds after processing, however, it may not be wrong to
state that experience has shown that the processing of return of
income under section 143(1) is not free from defects and some of the
adjustments made in such processing are beyond the powers of CPC
in terms of section 143(1). Moreover, any reply to the proposal to
make an adjustment under section 143(1) and/ or any rectification
request meets the same fate. Though no furor is raised over this as
such assessees are free to approach the appellate authorities and the
same is being done. Be that as it may, it is of utmost importance to
note that the processing of return of income cannot be the guiding
light to design the return of income. It is like the proverbial “putting a
cart before the horse” concept. How the returns would be processed
cannot be the basis to design the return. This itself shows the
fundamental fallacy in designing the return of income.
21. It is submitted that if the electronic return does not allow an assessee
to put forth his claim basis a perception of the revenue of the
correctness of such claim, then, such return has to be categorized as
arbitrary. It is a settled principle that humans cannot be made slaves
of technology. Time and again, this Hon’ble Court and other Courts
have come down heavily on the technological impediments causing
harassment to assessees.
22. Here, the Petitioners are more concerned with the action of the
Respondents in disabling an assessee from making a claim, which he
feels he is entitled to. This is clearly a human action, as such claim
was allowed to be made before 05.07.2024. The Petitioners only
request that the utility that enables the returns to be filed should be
designed in a fashion so that an assessee is at liberty to make any
14 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
claim which it desires to make. The provisions of the Act and the
Rules relied upon, have never empowered the Respondents to design
the return in a format so as to deny any person from making a claim.
23. Without prejudice to the above, it is submitted that when such issues
are highlighted by way of a representation (several representations
were made by several reputed bodies of tax practitioners including
the ICAI in the present case), then, atleast at such stage, the utilities
should be modified to allow an assessee to file its return of income by
making a claim of its choice.
24. During the course of hearing, the Ld. ASG had submitted that the
Petitioners are seeking to go back to a manual era. It is very
important to dispel this doubt at the threshold. There should not be
an iota of doubt that the Petitioners do not seek to go back to the
manual era. The Petitioner No. 1 has been very vocal about its
support of the electronic system and has never complained about the
same in any of the representations made over several years. The
Petitioners, however, feel that there should not be any sort of curbs or
restrictions in the online utility from entering a figure of an assessee’s
choice. The online utility should not freeze any cell and debar any
assessee from entering a figure or making a claim of his choice. The
same is not sought to be cured/ rectified by reverting back to filing
of a manual return but the issue can be easily resolved by modifying
the utility and allowing the assessees to make a claim. Just as in the
present case, the return utility before 05.07.2024 allowed an assessee
to claim rebate under section 87A against income taxable at special
rates. The same was modified and making of such claim was disabled.
On the directions of this Hon’ble Court, the same was again enabled
in January 2025. This itself signifies the contention of the Petitioner
that modification of the return of income would not lead to a
technological mess/ chaos or downfall of the electronic system as
suggested by the Ld. ASG.
25. During the course of hearing, the Ld. ASG has submitted that making
a claim in the return of income as per the bonafide belief of an
assessee is neither a constitutional nor a statutory right. It is
submitted that the said submission of the Ld. ASG is legally and
factually incorrect as submitted hereinbefore. Moreover, he also
submitted that even if such a right is considered to be a statutory
right then it is subject to statutory restrictions. It is submitted that the
Ld. ASG did not refer to any provision of law or rules which provides
for any such restriction. On the contrary, as mentioned earlier, the
action of Respondent No. 1 to not allow an assessee to make a claim
on the return of income is contrary to the provisions of the Act and
Rules framed thereunder.
26. In light of the above submission, to avoid inconvenience to the
assessees and Courts, the Petitioner prays that the Rule should be
made absolute in terms of prayer clause (c).
15 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
B. Allowability of rebate u/s 87A from tax levied at special rates,
where new regime is opted for
27. The Respondents have, without prejudice to their contention on
merits, allowed the assessees at large from claiming rebate as per the
directions of this Hon’ble Court vide order dated 20.12.2024. The Ld.
ASG has argued, in great detail, that the assessees are not allowed to
make a claim of rebate under section 87A if some part of their total
income is taxable at special rates.
28. It is submitted that, as noted by this Hon’ble Court in the order dated
20.12.2024, this petition concerns several lower middle and middle
class assesses making a claim for relief ranging from Rs. 1 to Rs.
25,000/- of the tax payable by them. This may be a minor relief from
an assessee’s perspective and would not be worth fighting at the
appellate stages. It is therefore, prayed, that this Hon’ble Court puts
this controversy to rest in this petition, so that there is clarity in the
mind of the assessees at large about the reliefs they are eligible for in
terms of section 87A of the Act.
29. It is submitted that an individual assessee is entitled to claim a rebate
as per section 87A of the Act. The same is to be claimed from the tax
payable on total income. The method for computation of income and
tax liability in terms of the Act is as under:
i) first compute the income chargeable under different heads of
income under Chapter IV;
ii) thereafter aggregate income and set off of intra head and inter
head losses in terms of Chapter VI and arrive at the gross total
income;
iii) subsequently, claim deductions under Chapter VI-A, from the
gross total income and arrive at the total income;
iv) compute the tax liability on the total income as per the rates
prescribed by the Finance Act of each year and/or as per the special
rates prescribed and compute the “tax on total income”;
v) claim inter alia rebate under section 87A of the Act from the tax on
total income;
vi) finally determine the tax liability.
30. As per section 87A of the Act, the conditions for claiming rebate, in
respect of income being offered to tax under the new regime is as
under:
i) total income of the assessee is chargeable to tax under section
115BAC(1A) of the Act, meaning thereby, new regime is applied;
ii) total income should not exceed Rs. 7,00,000/- ;
iii) rebate shall be allowable by way of deduction from the amount of
income-tax (as computed before allowing the deductions under the
said Chapter) on his total income with which he is chargeable for any
assessment year;
iv) rebate shall be the lower of 100% of such income-tax or Rs.
25,000/-;
16 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
v) if the income exceeds Rs. 7,00,000/- and the income tax payable
on such total income exceeds the amount by which the total income
is in excess of Rs. 7,00,000/-, then, the assessee shall be entitled to a
deduction from the amount of income-tax on his total income, of an
amount equal to the amount by which the income-tax payable on
such total income is in excess of the amount by which the total
income exceeds Rs.7,00,000/-.
Thus, rebate under section 87A of the Act, is allowed from the tax on
total income irrespective of the fact, whether the same is computed at
special rates.
31. The term ‘total income’ is defined in section 2(45) as total amount of
income referred to in section 5, computed in the manner laid down in
the Act. There can be only one total income which is the sum total of
all income under various heads of income. There is no provision that
income taxable at special rates are not to form part of total income or
is to form a separate total income. Rebate is allowable on the tax on
total income, which represents a summation of tax payable at special
rates and tax payable in accordance with the rates provided for in
the relevant Finance Act or section 115BAC(1A). Thus, a plain
reading of section 87A shows that it does not restrict the claim of
rebate only from income taxable at normal rates and prohibits the
same being granted when income taxable at special rates.
32. The Ld. ASG argued that there are two total income viz., one taxable
u/s 115BAC(1A) of the Act and other total income taxable at special
rates. It is humbly submitted that there is no such concept of two
total income. In fact, the word “total” itself suggests that total income
is the sum total or aggregate of all income of an assessee. The
provision for different computation mechanisms under different
heads of income and different rates of tax, are for different purposes.
However, at the end of the day, there is only one total income
comprising of all income. This also becomes clear from the title of
Chapter VI i.e., “Aggregation of income and set off or carry forward of
loss”. Further, section 80B (5) of the Act defines “gross total income”
to mean the total income computed in accordance with the provisions
of this Act before making any deduction under Chapter VIA of the
Act. Moreover, this contention of the Ld. ASG is clearly not tenable in
view of the express provisions of various sections of Chapter XII
dealing with income taxable at special rates. All the sections which
levy tax at special rates on a particular category of income like 111A,
112, 112A, 115A, 115AB, 115AC, 115ACA, 115AD, 115B, 115BB to
115BBJ clearly specify in the opening portion of relevant sections that
“Where the total income of an assessee includes any income
chargeable ….”. Thus, even the law contemplates that all income,
whether taxable at special rates or normal rates, are part of total
income. Reference may also be made to section 111A (2), 112(2),
112A(5) of the Act, wherein exception is made to not allow17 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxdeduction under Chapter VIA from the special category of income.
This was necessitated since deduction under Chapter VIA is allowable
from gross total income and such gross total income includes income
taxable at special rates.
33. It will also be apposite to refer to the ITR form prescribed by the
Central Government, especially the part which deals with
computation of tax liability. For the sake of ease, an extract is brought
out hereunder:
From the above also, it can be discerned that there is only one total
income and one tax liability.
34. It is submitted that the concept of two “total income” is completely
alien to the Act. In fact, acceptance of such an argument would have
its own perils like:
a. Deductions under Chapter VIA are allowed from total income.
While understanding total income, which income is to be seen?
b. Penalty is levied u/s 270A if there is any variation from total
income. A formula is laid down for how to compute under- reporting
of income where total income forms the starting point. While18 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxunderstanding total income, which income is to be seen?
35. It is submitted that wherever, the Legislature intended to not give
any benefit to any category of income which forms part of total
income or from tax at special rates, specific exceptions have been
prescribed without violating the definition of the term “total income”.
For instance, see section 80AB, 111A (2), 112(2), 112A(5) and
112A(6).
36. It is thus submitted that; rebate is allowable from total income
including tax levied at special rates. If the Legislative Intent were to
deny the rebate, then, a specific provision would have to be made
either in section 87A or the relevant provision of Chapter XII
providing for a special rate. There is no provision in section 87A of
the Act that rebate shall not be allowed in respect of tax computed at
special rates, say section 111A or 112 etc. of the Act. The proviso to
section 87A deals with allowability of rebate to an assessee who has
opted for the new regime. The proviso has nothing to do with the
section under which the income is charged to tax. Clause (a) of the
proviso, in no uncertain terms, state that “the assessee shall be
entitled to a deduction from the amount of income-tax (as computed
before allowing for the deductions under this Chapter) on his total
income with which he is chargeable” Thus, rebate is allowable from
the income tax on total income. It does not specify that such rebate is
not available in respect of tax levied under section 115BAC(1A). The
Respondents, therefore, are not right in taking a view that rebate is
not allowable from tax levied at special rates either under the old
regime or new regime.
37. The Respondent has harped on the opening wordings of the proviso
i.e., “Provided that where the total income of the assessee is
chargeable to tax under sub-section (1A) of section 115BAC” It is
submitted that such opening portion is only a qualifying condition to
enter the proviso, but the rebate is available from the income tax
payable on total income as per clause (a) and (b). Further, the
qualifying condition is that the person has opted for the new regime.
The income tax payable on total income is the summation of the tax
payable having regard to the applicable rates for different items of
income.
38. Even section 115BAC is very clear to this effect. An extract of Section
115BAC(1A) is brought out hereunder:
“Notwithstanding anything contained in this Act but subject to the
provisions of this Chapter, the income-tax payable in respect of the
total income of a person, being an individual or Hindu undivided
family or association of persons (other than a co- operative society),
or body of individuals, whether incorporated or not, or an artificial
juridical person referred to in sub-clause (vii) of clause (31) of
section 2, other than a person who has exercised an option under
sub-section (6), for any previous year relevant to the assessment year19 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxbeginning on or after the 1st day of April, 2024, shall be computed at
the rate of tax given in the following Table, namely: —
…..”
Thus, it can be seen that the total income of a person is taxable under
section 115BAC(1A). It is only for rate purposes in respect of certain
categories of income, one has to go to other sections of Chapter XII,
otherwise, total income is taxable under section 115BAC(1A) of the
Act. A combined reading of the proviso to section 87A and section
115BAC(1A) also gives the same interpretation that where a person
opts for new regime rebate shall be allowed from tax on total income,
irrespective of the fact that any income is taxable at special rates.
39. Section 115BAC (2) provides for conditions to fall within section
115BAC(1A). A person, to opt for a new regime, has to give up on
various deductions / exemptions/ allowances etc. However, reference
to rebate under section 87A is conspicuously absent in section
115BAC(2). In fact, vide Finance Act 2023, the Legislature provided
for higher rate of rebate for a person opting for new regime. Thus,
there is no express bar from claiming rebate from tax chargeable at
special rates.
40. It is submitted that the sections providing for payment of tax at
special rates also do not provide for non-allowability of rebate in
terms of section 87A as a condition to be fulfilled for availing of the
special rate. There are specific provisions made in sections111A,
112 etc., which provide that a deduction under Chapter VIA would
not be allowed if the special rate is applied. Likewise, section 115BAC
provides that no set off of loss is also permissible. However, there is
no specific mention of rebate under section 87A not being allowed
against tax levied under these sections. It is most important to note
that only section 112A of the Act, which provides for the rate of tax
applicable on the capital gains arising on the transfer of a long term
capital asset being an equity share in a company or a unit of an equity
oriented fund or a unit of a business trust, provides for non-
allowability of rebate under section 87A of the Act. A fortiorari, a
rebate under section 87A has to be allowed from tax levied at special
rates under other sections. Thus, the view of the Respondent that
rebate is not allowable from tax which is taxable at special rates is
not valid and should not be countenanced.
41. Moreover, the interpretation of the Respondents is in fact, contrary to
the intention of the Legislature which is evident from the explanatory
memorandum to the Finance Bills and also the Budget Speech of the
Hon’ble Finance Minister. The same, for the sake of convenience, is
brought out hereunder:
i) Budget Speech for the FY 2013-14
“125. The rates of personal income tax have survived four Finance
Ministers and four Governments. The current slabs were introduced
only last year. Hence, I am afraid, there is no case to revise either the20 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxslabs or the rates. Besides, even a moderate increase in the level of
threshold exemption will mean that hundreds of thousands of tax
payers will go out of the tax net and the tax base will be severely
eroded. Nevertheless, I am inclined to give some relief to the tax
payers in the first bracket of `2 lakh to `5 lakh. Assuming an inflation
rate of 10 percent and a notional rise in the threshold exemption
from `2,00,000 to `2,20,000, I propose to provide a tax credit of
`2,000 to every person who has a total income upto `5 lakh. 1.8
crore tax payers are expected to benefit to the value of `3,600 crore”
ii) Explanatory memorandum to Finance Bill 2013
“With a view to provide tax relief to the individual tax payers who are
in lower income bracket, it is proposed to provide rebate from the tax
payable by an assessee, being an individual resident in India, whose
total income does not exceed five lakh rupees.”
iii) Budget Speech for the FY 2016-17
“Relief to small tax payers 118. In order to lessen tax burden on
individuals with income not exceeding `5 lakhs, I propose to raise the
ceiling of tax rebate under section 87A from `2,000 to `5,000. There
are 2 crore tax payers in this category who will get a relief of `3,000
in their tax liability.”
iv) Explanatory memorandum to Finance Bill 2016
“Rationalization of limit of rebate in income-tax allowable under
Section 87A The existing provisions of section 87A of Income-tax Act,
provide for a rebate of an amount equal to hundred per cent of such
income-tax or an amount of two thousand rupees, whichever is less,
from the amount of income-tax to an individual resident in India
whose total income does not exceed five hundred thousand rupees.
With the objective to provide relief to resident individuals in the
lower income slab, it is proposed to amend section 87A so as to
increase the maximum amount of rebate available under this
provision from existing Rs.2,000 to Rs.5,000.”
v) Budget Speech for Interim Budget for the FY 2019-20
“60. Reducing the tax burden on middle class has always been our priority
ever since our Government took over in 2014. We increased the basic
exemption limit from Rs. 2 lakh to Rs. 2.5 Lakh and gave tax rebate
so that no tax was payable by persons having income up to Rs.3
lakh.”89. Individual taxpayers having taxable annual income up to `
5 lakhs will get full tax rebate and therefore will not be required to
pay any income tax. As a result, even persons having gross income up
to ` 6.50 lakhs may not be required to pay any income tax if they
make investments in provident funds, specified savings, insurance
etc. In fact, with additional deductions such as interest on home loan
up to ` 2 lakh, interest on education loans, National Pension Scheme
contributions, medical insurance, medical expenditure on senior
citizens etc., persons having even higher income will not have to pay
any tax. This will provide tax benefit of ` 18,500 crore to an
21 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
estimated 3 crore middle class taxpayers comprising self employed,
small business, small traders, salary earners, pensioners and senior
citizens.”
vi) Budget Speech for FY 2019-20
“Moderation of tax rates: It is an ongoing endeavour of the
Government to moderate the tax rate in order to reduce the tax
burden and increase compliance. In this direction, following major
steps have been taken: (i) 100% tax rebate was provided to
individuals having taxable income up to Rs. 5 lakh. Thus, no income-
tax is payable by an individual having taxable income up to Rs. 5
lakh.”
vii) Budget Speech for FY 2023-24
“146. The first one concerns rebate. Currently, those with income up
to ` 5 lakh do not pay any income tax in both old and new tax
regimes. I propose to increase the rebate limit to` 7 lakh in the new
tax regime. Thus, persons in the new tax regime, with income up to `
7 lakh will not have to pay any tax.
Annexure to Part B of the Budget Speech 2023-24
Resident individual with total income up to ` 5,00,000 do not pay
any tax due to rebate under both old and new regime. It is proposed
to increase the rebate for the resident individual under the new
regime so that they do not pay tax if their total income is up to `
7,00,000.”
viii) Explanatory memorandum to Finance Bill 2023 “IV. Rebate under
section 87A
ix) Under the provisions of section 87A of the Act, an assessee, being
an individual resident in India, having total income not exceeding Rs
5 lakh, is provided a rebate of 100 per cent of the amount of income-
tax payable i.e., an individual having income till Rs 5 lakh is not
required to pay any income-tax.
x) From assessment year 2024-25 onwards, an assessee, being an
individual resident in India whose income is chargeable to tax under
the proposed sub-section (1A) of section 115BAC, shall now be
entitled to a rebate of 100 per cent of the amount of income-tax
payable on a total income not exceeding Rs 7 lakh”
Thus, from the above, it can be deduced, that the intention always
was that rebate is to be allowed from tax on total income without any
conditions, whether any income is taxable at a special rate or the
normal rate. The purpose of the rebate is to provide reliefs to small
taxpayers whose income does not exceed say Rs. 5,00,000/- or Rs.
7,00,000/-. Instead of increasing the basic exemption limit, rebate is
provided, so that such assessees would get the benefit whereas the
assessees whose income exceed such limit for claiming rebate, they
do not get any relief, and they still have to pay tax on the income
below such limit of Rs. 5,00,000/- or Rs. 7,00,000/-. The treatment of
the Respondents of not providing rebate under section 87A from tax22 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxchargeable at special rate under the new regime, is neither flowing
from the plain interpretation of section 87A, nor from the intention of
the Legislature. Merely because some income is taxable at different
rates, does not mean that the rebate should be denied in respect of
such income. Therefore, such an interpretation of the Respondents
should not be countenanced.
43. If the interpretation of the Department is accepted, which is what the
utility is doing right now, then, even an assessee with short term
capital gains of Rs. 10,00,00,000/- on which the tax payable would
be in accordance with the provisions of section 111A and income of
Rs. 7,00,000 taxable at the rates provided for in section 115BAC(1A)
would be eligible to a rebate of Rs. 25,000/-. Thus, even if the
assessee is a rich man having substantial income, still the
Departments interpretation is allowing rebate to such person, which
is contrary to the avowed object of allowing rebate to small persons.
44. In fact, the first proviso to section 87A allows rebate being lower of
amount of tax or Rs. 25,000/- whichever is less. If the tax is levied
under section 115BAC(1A), then, the tax would never be more than
Rs. 25,000/- on income upto Rs. 7,00,000/- Tax would be more than
Rs. 25,000/- only if income is taxed at special rates. This itself
suggests that the Act contemplates that rebate is also available on tax
calculated on income taxable at special rates.
45. The Respondents have accepted that if income is taxable under the
old regime, then, rebate is available against all categories of income.
All income which is taxable at special rates i.e., under section 111A,
112, 112A etc. continue to apply, whether under old regime or under
new regime. Thus, to allow rebate under the old regime and not
allow the same under the new regime in respect of tax levied at
special rates, itself is discriminatory and violative of Article 14. This is
also against the intention of the Legislature to push people to go
under new regime.
46. There is no legal basis to say that the plain reading of the proviso to
section 87A gives only one interpretation that rebate is available only
in respect of tax leviable under section 115BAC(1A) of the Act. The
Petitioner has also annexed to the Petition, representations made by
other professional bodies which makes it clear that the professional
fraternity including the ICAI, are of the same view in contrast to the
view of the Respondent
47. Thus, clearly, the interpretation of the Respondent is not tenable and
therefore, should not be countenanced. The benefits available under
the Act to small taxpayers should be allowed to them without any
fetters.
48. An intimation under section 143(1) denying such claim of rebate, is
in contravention of law, is invalid and, therefore, ought to be quashed
and set aside. Further, the Respondents should be directed to not
make any such disallowance in any future processing and to reverse23 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxthe disallowance of claim already made by the Respondents.
Consequential refunds to the assessees should be granted
immediately with interest as per law.
49. In light of the above submission, the Petitioners humbly pray that the
Rule should be made absolute in terms of prayer clause (a) and (d).
SUBMISSIONS OF THE RESPONDENTS :
10. Mr. Venkatraman learned Additional Solicitor General (ASG)
of India, vehemently defended the action of the respondents and has
filed written submissions which read as under:
1. The main clause of Section 87A of the Income Tax Act, 1961 provided
a tax rebate of Rs. 12,500 for such of those individuals whose income
was below Rs. 5 Lakhs. The Section provided a maximum rebate of
Rs. 12,500. The rationale behind this incentive is two-fold. There is a
threshold exemption from Income-tax up to Rs. 2.5 lakhs. Between Rs.
2.5 Lakhs and Rs. 5 Lakhs, the Rate of tax is 5%, which would be Rs.
12,500. Instead of extending the exemption limit up to Rs. 5 Lakhs,
the Act conceives the mechanism of a rebate to ensure that Assessees
earning an income of Rs. 5 Lakhs do not pay Income-tax, yet those
assessees whose income is above Rs. 2.5L would still file returns, but
would be granted a rebate from Income-tax.
2. With effect from April 2021, Parliament brought a new optional
scheme for payment of Income-tax by individuals and HUFs on gross
income basis, but at reduced rates of tax through Section 115BAC(1)
of the Act. Broadly, this optimal scheme envisaged the following:
a. It would apply to individuals and HUFs.
b. those who avail Section 115BAC shall have to forgo certain
deductions and exemptions as stipulated under Section
115BAC(2).
c. Such assessees are entitled to pay tax at the reduced rate on
their total income.
3. However, Section 115BAC(1) envisaged a non-obstante clause
overriding all the provisions of the Income Tax Act, 1961, of course
subject to the provisions under Chapter 12. In other words, the
override was against the entire Act, except the provisions of Chapter
12.
4. With effect from 01.04.2024, Parliament introduced clause (1A) to
Section 115BAC which envisaged the following:
a. With effect from 01.04.2024, Section 115BAC(1A) became the
default scheme for payment of Income-tax, unless otherwise an
assessee chooses to opt the old regime and does so in terms of
Section 115BAC(6) of the Act.
24 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
b. This default scheme became mandatory unless opted out by virtue
of Sub-clause (6) to individuals, HUF, Association of persons (other
than a cooperative society), Body of individuals whether
incorporated or not or an Artificial Juridical Person referred to in
Sub-clause (vii) of Clause (31) of Section 2 of the Act.
c. Sub-clause (1A) again could override all the provisions of the
Income Tax Act, 1961 except the provisions of this Chapter namely
Chapter 12. This is self-evident by virtue of the expressions
“notwithstanding anything contained in this act but subject to the
provisions of this chapter”.
d. Those who come under this default scheme of Section 115BAC(1A)
would have to forgo those deductions and exemptions stipulated
under clause (2) and would be entitled to pay Income-tax at the
reduced rates as prescribed in sub-clause 1A of the said Section.
5. On the introduction of Clause 1A to Section 115BAC which was with
effect from 01.04.2024, Parliament simultaneously introduced a
proviso to Section 87A which also came into effect from 01.04.2024
extending the threshold rebate to a total income of Rs. 7 lakhs and
doubling the quantum of rebate from Rs. 12,500 to Rs. 25,000, in line
with the schedule of rates prescribed under Sub-clause 1A to Section
115BAC.
6. Therefore, post 01.04.2024, assessees whose income is less than 5L
could claim a rebate of 12,500 in terms if the Main clause of Section
87A and those Notified under Section 115BAC(1A) would be entitled
to a rebate of Rs. 25,000 upto an income of Rs. 7 Lakh by virtue of the
proviso to Section 87A.
7. Sub-clause (b) to the proviso to Section 87A gives a reduced marginal
rebate beyond Rs. 7 Lakhs and up to Rs. 7.4 Lakhs (this issue is
inconsequential in this matter and therefore not elaborated further).
8. Following questions arises for consideration and interpretation by this
Hon’ble Court:
a. What does the expression “subject to the provisions of this chapter”
in Clause 1A of Section 115BAC would mean and whether this
rigor would apply even to the proviso to Section 87A in computing
the total income of Rs. 7 Lakhs?
b. How should the expression “total income” be construed in light of
the expression “subject to the provisions of this chapter”?
9. Taking the 1st question, clause 1A of Section 115BAC though overrides
all other provisions of the Income Tax Act, 1961, is still subject to the
provisions of this chapter (namely provisions of Chapter 12).
10. Now taking the 2nd question, the interplay of the expression “total
income” with the expressions “subject to the provisions of the Act”,
Clause 1A in no uncertain terms, makes it clear that total income as
specified in the said sub-clause would only mean total income subject
to the provisions of this Chapter.
11. There is no contest or disputes by either sides that the total income
25 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
which is spread over many heads such as, salary, income from house
property, capital gains, income arising out of search, unaccounted
income etc., have all been captured independently under various
provisions of Chapter 12. Chapter 12 comprises of Sections 110 to
115BBJ and have captured short term capital gains, long term capital
gains, royalties, profits and gains of life insurance business, tax on
lotteries, anonymous donations, incomes referred to in Sections 68,
69, 69A, 69B, 69C and 69D (Section 115BBE), income from transfer
of carbon credits, Income from virtual digital asset etc., as special
incomes with independent rates of taxation.
12. There is no dispute on the fact that incomes falling under various
Sections of Chapter 12 (Section 110-115BBJ), would all finally get
assimilated to form total income.
13. Two things are therefore apparent and evident from a plain reading of
clause 1A of Section 115BAC:
a. Total income is one which is scattered over various provisions of
Chapter 12 and what is taken into reckoning for reduced rates
of taxation are only such categories of total income which would
fall under clause (1A) of Section 115BAC, excluding every other
total income falling under other Sections of Chapter 12. This
interpretation is inevitable for the simple reason that though
clause (1A) is a notwithstanding clause, and the override is
across the Income Tax Act, 1961 but with one singular limitation
that the same is still subject to the provision of Chapter 12. In
other words, clause (1A) does not override Sections 110 to
115BBJ of Chapter 12.
b. Once this is clear, the second inference in natural and
consequential. Only such of those total income which falls under
clause (1A) will get the benefit of reduced rate of taxation while
such of those total income falling under other provisions of
Chapter 12 will continue to be taxed at the specified rates
referred to in those respective provisions.
14. Even though both sets of income, one falling under clause (1A) and
the rest falling under other provisions of Chapter 12 would constitute
elements of total income, the segregation and treatment for such total
income falling under clause (1A) and rest of the provisions of Chapter
12 are distinct and different.
15. Once this interpretation passes the muster, let us turn our attention to
the proviso to Section 87A.
16. The unambiguous expression employed in the proviso to Section 87A
is as follows:
“Provided that where the total income of the assessee is chargeable to
tax under sub-section (1A) of section 115BAC, and the total income”
17. It is clear from the above that the benefit of rebate of Rs. 25,000 on a
total income of Rs. 7 lakhs would only mean such total income which
falls under clause (1A) of Section 115BAC and would not include total
26 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
income falling under other provisions of Chapter 12, namely Sections
110-115BBJ.
18. The computation form available in the portal is perfectly in synch with
clause (1A) of Section 115BAC read with the proviso to Section 87A.
An illustration would explain the provisions adequately. If an
individual earns a total income of Rs. 6 lakhs constituting as total
income under clause (1A) of Section 115BAC and an income of Rs. 1
Lakh as found under Section 115BBE, the later income falling under
Section 115BBE cannot constitute as total income under clause (1A)
of Section 115BAC. It would nevertheless be total income, but not
total income falling under clause (1A) of Section 115BAC.
19. Therefore in terms of the proviso to Section 87A, the extent of rebate
under clause (1A) of Section 115BAC can be extended only up to Rs.
6 Lakhs and cannot be extended to the income falling under Section
115BBE. This interpretation is legal and legitimate emanating from
the plain language of clause (1A) of Section 115BAC read with the
proviso to Section 87A.
20. The interpretation sought to be made by the assessees that clause
(1A) of Section 115BAC is only for rates and cannot be taken
cognizance of, for total income is unsustainable in law and the fallacy
is self-revealing in view of the following:
a. Income Tax Act, 1961 can apply rates only on total income and
not in abstract.
b. Chapter 12 comprises of Section 110-115BBJ envisages income
from various streams which would form part of total income for
the purpose of taxation.
c. The assumption that clause (1A) of Section 115BAC has
assimilated all the income arising out of Chapter 12 as total
income within one single bucket, namely clause (1A) is clearly
wrong. The contrary is well espoused by clause (1A). It makes it
abundantly clear that only such total income other than the
total income falling under other provisions of chapter 12 would
alone get captured under clause (1A) and only those total
income would have the preferential rate of taxation, while the
rest of the total income spread across chapter 12 would be get
assessed as per those provisions.
21. It is therefore very clear that both in the case of total income as well
as preferential rate of taxation, a clear distinction is made between
clause (1A) of Section 115BAC and rest of the provisions, and
therefore the submissions by the assessees that clause (1A) is only
with reference to rates and not total income is unsustainable.
22. Now coming to the proviso to Section 87A, here again the reference is
only to total income falling under clause (1A) of Section 115BAC,
whereas the assesses contended that the same should be read as total
Income of the assessees chargeable to tax under Chapter 12. Such an
interpretation goes contrary to the plain language of Section 87A, and
27 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
an invitation to such an interpretation through a judicial order is
nothing but suggesting a rewriting of a Parliamentary provision
through a judicial pronouncement which is unacceptable in our
jurisprudence. Judicial legislation is an impermissible exercise and a
clear encroachment of the sovereign powers of the Parliament, and
therefore such an interpretation needs to be eschewed by this Hon’ble
Court.
23. Now coming finally to the omnibus prayer of the Petitioners that they
are entitled to file a return as per their belief and choice, the same
again is unsustainable for the following reasons:
d. Canons of interpretation had reiterated the well settled principle as to
when would a mandamus be issued. A mandamus would lie only
when:
i. A party has an enforceable right
ii. Or an authority has statutory duty, obligation or a public duty
to discharge and has failed to do so
iii. Consequently, enforcement of a Mandamus would arise only
when there is a right available and there has been a failure to
discharge and statutory duty or obligation.
e. A plain reading and interpretation of clause (1A) to Section 115BAC
read with the proviso to Section 87A, and the electronic form to be
filled up by the assessee would show a perfect synch and harmony
without any disparity or inconsistency.
f. When the form in question is in line with the statutory provisions,
where does the assessee get a right, and that too, an enforceable right
of Mandamus to file a claim which can even be a wrong or
illegitimate claim.
g. Reliance placed by assessees on judgements rendered during the pre-
electronic era would have no bearing in a regime wherein the portal
envisages filing of returns by crores and crores of assessees in line
with the statutory mandate.
h. More than 8.5 crore assessees file returns online and there are more
than 25 High Courts in this country. None of the assessee have come
forward to challenge the existing electronic digitised system with least
manual interference capturing returns, processing them and issuing
deliverables on time with absolute accuracy.
i. Homogeneity and uniformity besides consistency are much needed
virtues for a highly digitised system or gateway to function, may it be
an income-tax portal or a GST portal, which are considered the
largest gateways in the world.
j. The contention of the petitioners that even if law gets settled against
the petitioners, still they should be vested with a right to file a return
which they believe it to be correct has to be rejected outright in an
electronic regime, which has exhibited high level of accuracy and
performance. If returns have to allowed to be filed based on one’s
belief and not based on statutory provisions and mandate, endless28 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docxand countless types of returns would get filed which cannot be
assimilated and processed in a digitised mechanism.
k. Constitutional democracy permits only enforcement of rights
guaranteed either as Constitutional Right or Fundamental Right or as
a Statutory Right. The exposition that one’s belief should accrue as a
right to a citizen is too vulnerable and dangerous a proposition to be
sustained.
l. If every belief of an assessee becomes an automatic right under the
Income Tax Act, 1961, it would be the end of era of Constitutional
democracy and beginning of era of Constitutional anarchy. This whole
attempt is to push a well-functioning digitised system into a stone
age, make it dysfunctional, unworkable and meaningless, and all of
this is at what price? only to nurture the belief of an assessee and not
the right of an assessee.
m. Upholding this plea would sabotage the existing farmwork of
operation and implementation leading to disastrous consequences,
more so when the Writ Petition is pursuing an academic exercise
without any underlying issue in principle and wants to secure an
omnibus open ended relief for times to come without any assessee
being aggrieved in any manner.
n. Such open ended mandamus is uncalled for and undesired.
Constitutional courts should never decide academic questions nor
should grant reliefs without an underlying issue to deal with.
o. Weighing the options, grant of relief prayed for would collapse the
digital operation and implementation when no one has found fault
with it.
p. With a sense of responsibility that this pursuit is not made anywhere
else in any other High Court, but being tried consistently before this
Hon’ble Court.
q. The petitioners placed reliance on the interim order passed in the case
of Lupin Limited v. Deputy commissioner of Income Tax, W.P(L)
38926 of 2022, dated 16.12.2022, wherein this Hon’ble Court
permitted the assesses to file paper returns as an interim measure. A
copy of the order dated 16.12.2022 is annexed herewith and marked
as EXHIBIT R-1. Attention is also drawn to a similar order dated 27-
11-2022 in WP (L) No. 2570 of 2022 [Final No. WP/3109/2023]
passed in the case of Tata Sons Pvt Ltd in WP wherein they were
permitted to file paper returns. A true copy of the said order dated
16.12.2022 in WP (L) No. 2570 of 2022 in Tata Sons Pvt Ltd is
annexed herewith and marked as EXHIBIT R-2. Both these matters
came up for final hearing before this Hon’ble court on 26.03.2024.
r. Attention is also drawn to a similar order in the case of Tata & Sons v.
Deputy commissioner of Income Tax in WP No. 3109 of 2022 wherein
they were permitted to file paper returns. Both these matters came up
for final hearing before this Hon’ble court on 26.03.2024 and in the
case of Lupin (supra), since the assessments were completed based on
29 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
the decision of the Hon’ble Supreme Court, the returns were
processed and nothing remained pending in the Writ Petition and the
same was disposed of. A copy of the said order passed on 26.03.2024
in WP No.3565/2023 in Lupin Ltd is annexed herewith and marked as
EXHIBIT-R-3.
s. Whereas, in the case of Tata (supra) , the same Bench on the very
same day allowed the petitioners to withdraw and purse alternative
remedy. The assessees had to resort to this remedy since it was
pointed out that there was no fallacy in the law or in the digitised
system, However, in both these matters, the core argument which was
attempted was the right to file a return in any manner based on one’s
belief. . A copy of the said order dated 26-03-2023 in WP No. 3109 of
2022 in Tata Sons Pvt Ltd is annexed herewith and marked as
EXHIBIT-R- 4
t. This Hon’ble court after hearing both parties for a full day decided not
to grant the prayer of the petitioners and as petitioners advocate
advanced the argument of pursuing an alternate remedy available to
them, this Hon’ble Court allowed the petitioners to have the writ
petitions and in accordance closed Writ Petition No. 3109 of 2022,
and whereas the same was also followed in the case of Lupin in Writ
Petition No. 3565 of 2023 & Writ Petition No. 32741 of 2023 since
assessments stood completed already.
u. This Hon’ble Court did not recognise or approve the contentions of
the petitioners for an open ended filing of returns after taking on
record the detailed affidavit filed by the Revenue bringing out the
operational mechanisms of the digitised systems.
v. Knowing fully well that this Hon’ble court had not yielded, one more
vexatious attempt is sought to be made seeking the same prayer and
relief for the 3rd time.
w. This attempt to frustrate a well performing digitised system needs to
be rejected and its therefore most humbly prayed that this Writ
Petition needs to be rejected.
ANALYSIS AND REASONING:
11. Relevant provisions which arise for our consideration are Section
87A and Section 115BAC which read as under:
Section 87A- Rebate of Income-tax in case of certain individuals:-
An assessee, being an individual resident in India, whose total
income does not exceed [five hundred thousand] rupees, shall be
entitled to a deduction, from the amount of income-tax (as
computed before allowing the deductions under this Chapter) on
his total income with which he is chargeable for any assessment
year, of an amount equal to hundred per cent of such income-tax or
30 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
an amount of [twelve thousand and five hundred] rupees,
whichever is less:]
[Provided that where the total income of the assessee is chargeable
to tax under sub-section (1A) of section 115BAC, and the total
income-
(a does not exceed seven hundred thousand rupees, the assessee
shall be entitled to a deduction from the amount of income-tax (as
computed before allowing for the deductions under this Chapter)
on his total income with which he is chargeable for any assessment
year, of an amount equal to one hundred per cent of such income-
tax or an amount of twenty-five thousand rupees, whichever is less;
(b) exceeds seven hundred thousand rupees and the income-tax
payable on such total income exceeds the amount by which the
total income is in excess of seven hundred thousand rupees, the
assessee shall be entitled to a deduction from the amount of
income-tax (as computed before allowing the deductions under this
Chapter) on his total income, of an amount equal to the amount by
which the income-tax payable on such total income is in excess of
the amount by which the total income exceeds seven hundred
thousand rupees.
Section 115 BAC- Tax on income of individuals [, Hindu undivided
family and others]
(1)………
(1A) Notwithstanding anything contained in this Act but subject to
the provisions of this Chapter, the income-tax payable in respect of
the total income of a person, being an individual or Hindu
undivided family or association of persons (other than a co-
operative society), or body of individuals, whether incorporated or
not, or an artificial juridical person referred to in sub-clause(vii) of
clause (31) of section 2, other than a person who has exercised an
option under sub-section (6), for any previous year relevant to the
assessment year beginning on or after the 1st day of April, 2024,
shall be computed at the rate of tax given in the following Table,
namely:-
TABLE
Sr. No. Total income (2) Rate of tax (3)
(1)
1. Upto Rs. 3,00,000 Nil
2. From Rs. 3,00,001 to Rs. 6,00,000 5 per cent
3. From Rs. 6,00,001 to Rs. 9,00,000 10 per cent
4. From Rs. 9,00,001 to Rs. 12,00,000 15 per cent
5. From Rs. 12,00,001 to Rs. 15,00,000 20 per cent
6. Above Rs. 15,00,000 30 per cent
31 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
Following sub-section (1A) shall be substituted for the existing sub-
section (1A) of section 115BAC by
the Finance (No. 2) Act, 2024, w.e.f. 1-4-2025:
(1A) Notwithstanding anything contained in this Act but subject to
the provisions of this Chapter, the income-
tax payable in respect of the total income of a person, being an
individual or Hindu undivided family or
association of persons (other than a co-operative society), or body
of individuals, whether incorporated or
not, or an artificial juridical person referred to in sub-clause (vii) of
clause (31) of section 2, other than a
person who has exercised an option under sub-section (6),-
(i) for any previous year relevant to the assessment year beginning
on the 1st day of April, 2024, shall be
computed at the rate of tax given in the following Table, namely:-
TABLE
Sr. No. Total income (2) Rate of tax (3)
(1)
1. Upto Rs. 3,00,000 Nil
2. From Rs. 3,00,001 to Rs. 6,00,000 5 per cent
3. From Rs. 6,00,001 to Rs. 9,00,000 10 per cent
4. From Rs. 9,00,001 to Rs. 12,00,000 15 per cent
5. From Rs. 12,00,001 to Rs. 15,00,000 20 per cent
6. Above Rs. 15,00,000 30 per cent
(ii) for any previous year relevant to the assessment year beginning
on or after the 1st day of April, 2025, shall be computed at the rate
of tax given in the following Table, namely:-
TABLE
Sr. No.(1) Total income (2) Rate of tax (3)
1. Upto Rs. 3,00,000 Nil
2. From Rs. 3,00,001 to Rs. 6,00,000 5 per cent
3. From Rs. 6,00,001 to Rs. 9,00,000 10 per cent
4. From Rs. 9,00,001 to Rs. 12,00,000 15 per cent
5. From Rs. 12,00,001 to Rs. 15,00,000 20 per cent
6. Above Rs. 15,00,000 30 per cent
2) For the purposes of sub-section (1A), the total income of the
person referred to therein, shall be computed-
(i) without any exemption or deduction under the provisions of
clause (5) or clause (13A) or prescribed under clause (14) (other
than those as may be prescribed for this purpose) or clause (17) or
32 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
clause (32), of section 10 or section 10AA or clause (ii) or clause
(iii) of section 16 or clause (b) of section 24 [in respect of the
property referred to in sub- section (2) of section 23] or clause (iia)
of sub-section (1) of section 32 or section 32AD or section 33AB or
section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause
(iii) of sub-section (1) or sub-section (2AA) of section 35 or section
35AD or section 35CCC or under any of the provisions of Chapter
VI-A other than the provisions of sub-section (2) of section 80CCD
or sub-section (2) of section 80CCH or section 80JJAA;]
(ii) without set off of any loss,-
(a) carried forward or depreciation from any earlier assessment
year, if such loss or depreciation is attributable to any of the
deductions referred to in clause (i);
(b) under the head “Income from house property” with any other
head of income;
(iii) by claiming the depreciation, if any, under any provision of
section 32, except clause (iia) of sub-section (1) of the said section,
determined in such manner as may be prescribed; and
(iv) without any exemption or deduction for allowances or
perquisite, by whatever name called, provided under any other law
for the time being in force.
(3)………
(4)………
(5)………
(6) Nothing contained in sub-section (1A) shall apply to a person
where an option is exercised by such person, in the manner as may
be prescribed, for any assessment year, and such option is
exercised,-
(i) on or before the due date specified under sub-section (1) of
section 139 for furnishing the return of income for such assessment
year, in case of a person having income from business or profession,
and such option once exercised shall apply to subsequent
assessment years; or
(ii) along with the return of income to be furnished under sub-
section (1) of section 139 for such assessment year, in case of a
person not having income referred to in clause (i):
Provided that the option under clause (i), once exercised for any
previous year can be withdrawn only once for a previous year other
than the year in which it was exercised and thereafter, the person
shall never be eligible to exercise the option under this sub-section,
except where such person ceases to have any income from business
or profession in which case, option under clause (ii) shall be
available.
33 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
ISSUES BEFORE THE COURT:
A) The issue that requires our consideration is whether respondents
are justified in modifying their utility, whereby an assessee is debarred
at the threshold from making a rebate claim under Section 87A while
uploading his return of income online.
B) To examine the above issue, we must adjudicate whether the
claim proposed to be made under Section 87A of the Act by an assessee
is ex facie frivolous and does not even admit of an argument, justifying
the respondents in modifying their utility and preventing at the very
threshold an assessee from making such a claim at the time of
uploading his return of income.
C) The controversy on merits can be explained by following
hypothetical example:
Mr. A has income of Rs.10/- which is chargeable to tax at special rate of
20% (other than Section 115BAC) and Rs.100/- which is chargeable to
tax at rate prescribed under Section 115BAC of 10%. His total tax will
be as follows;
Income Tax
115BAC Rs.100/- Rs.10/-
Other RS.10/- Rs.2/-
Rs.110/- Rs.12/-
The issue is whether a rebate under Section 87A is to be
deducted from tax of Rs.10 or Rs.12 and whether the utility can
regulate it ?
34 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
12. Before we delve into the issues raised for our consideration, it is
apt to summarise and analyse the Constitution of India and the scheme
of the Income-tax Act, 1961. Analysing the scheme will assist us in
appreciating the parties’ submissions.
13. Under Article 265 of the Constitution of India, no tax shall be
levied or collected except by authority of law. Article 300A of the
Constitution provides that no person shall be deprived of his property
save by the authority of law. The legislature’s power to enact the
Income-tax Act can be traced in List 1 of Schedule VII to the
Constitution of India, read with Article 246 of the Constitution. The
power to tax is an incident of sovereignty and the Constitution of India
is the supreme law of the land. Therefore, the Income-tax Act is
subordinate to the Constitution and must be read and interpreted in
light of the constitutional provisions. As per Article 265, not only the
levy but also the collection of tax must be under some authority of law,
and the law would mean law enacted by the legislature and cannot
include an executive order. Any act of the authorities under the Income-
tax Act which seeks to impose or collect the tax by denying at the
threshold a person from making a debatable and arguable claim would
be unconstitutional.
14. Section 2(24) of the Act defines ‘income’ to include various items
specified therein. Section 2(37A) defines ‘rate or rates in force’ in
35 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
relation to the assessment year or financial year to mean the rate or
rates of income-tax specified in the Finance Act of the relevant year.
Section 2(43) defines ‘tax’ to mean income-tax chargeable under the
provisions of this Act. Section 2(45) defines ‘total income’ to mean ‘the
total amount of income referred to under Section 5, computed in the
manner laid down in this Act’.
15. Section 4 is the charging section which provides that where any
Central Act enacts that income-tax shall be charged for any assessment
year at any rate or rates, income-tax at that rate or those rates shall be
charged for that year in accordance with, and subject to the provisions
(including provisions for the levy of additional income-tax) of this Act
in respect of the total income of the previous year of every person.
16. Section 5 defines the scope of total income and Section 5(1)
provides that subject to the provisions of this Act, the total income of
any previous year of a person who is a resident includes all income from
whatever source derived. Insofar as Section 5(2) is concerned, it
provides in the case of a non-resident to include all income from
whatever source derived, which is received or is deemed to be received
in India, or accrues or arises or is deemed to accrue or arise to him in
India.
17. Chapter IV of the Income-tax Act deals with the computation of
36 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
total income and it comprises of Section 14 to Section 59. Section 14
deals with Heads of income and it provides that all income shall for the
purposes of charge of income-tax and computation of income be
classified under the heads of income specified therein namely salaries,
income from house property, profits and gains of business or profession,
capital gains, income from other sources. The said Chapter contains
various provisions as to how income under each head is to be
computed.
18. Chapter V deals with the inclusion of income of other persons in
assessee’s total income.
19. Chapter VI of the Act deals with aggregation of income and set
off or carry forward of loss.
20. Chapter VI-A provides for deductions to be made in computing
total income and it comprises of Sections 80A to 80U. Section 80A(1)
provides that in computing the total income of an assessee, there shall
be allowed from his gross total income, in accordance with and subject
to the provisions of this Chapter, the deductions specified under sections
80C to 80U. Section 80A(2) provides that the aggregate amount of the
deductions under Chapter VI-A shall not exceed the gross total income
of an assessee. Section 80B(5) defines ‘gross total income’ as the total
income computed in accordance with the provisions of this Act before
making any deduction under Chapter VI-A. It means that the total
37 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
income has to be computed in accordance with the provisions of this Act
which will amount to gross total income and from such gross total
income deductions under Chapter VI-A shall be made to arrive at the
total taxable income.
21. Chapter VIII deals with rebates and reliefs. Section 87(1)
provides that in computing the amount of income-tax on the total
income of an assessee with which he is chargeable for any assessment
year, there shall be allowed from the amount of income-tax (as
computed before allowing the deductions under Chapter VIII), in
accordance with and subject to the provisions of sections 87A and 88E,
the deductions specified in those sections and the aggregate amount of
deductions under Section 87A or Section 88E shall not exceed the
amount of income-tax (as computed before allowing the deductions
under this Chapter) on the total income of the assessee with which he is
chargeable for any assessment year . To summarise Section 87, it means
that rebate under Section 87A and / or 88E should not exceed the
amount of income-tax computed before calculating such rebate. We
may, however, observe that the provisions of Section 88E are not
applicable after 1 April 2009 and therefore, what remains in Chapter
VIII is only Section 87 and 87A.
22. Chapters IX, X and X-A deal with anti-avoidance provisions.
23. Chapter XII comprising of Sections 110 to 115BBJ deal with
38 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
determination of tax in certain special cases. On a reading of various
provisions of Chapter XII, it indicates that Chapter XII provides for rates
of tax with respect to certain special income which is dealt with in the
said Chapter. For example, Section 111A deals with rate of tax on short-
term capital gains and it provides for rate of tax of 15% on such short-
term capital gains. Section 112(1)(a) provides for rate of tax on long-
term capital gains at the rate of 12.5% if the transfer takes place after
23 July 2024 and 20% if it is before 23 July 2024 (in the case of an
individual or an HUF). Sections 112(1)(b) and 112(1)(c) provides for
different rates of tax based on whether an assessee is a domestic
company or a non-resident etc. Section 112A deals with rate of tax on
long-term capital gains if the gain arises from the transfer of a long-
term capital asset being an equity share in a company or a unit of an
equity oriented fund, or a unit of a business trust, and the rate of tax
on such capital gain is specified in Section 112A(2) which is 12.5% if
the gain takes place after 23 July 2024 or 10% if the gain is before 23
July 2024. Section 113 deals with tax in the case of block assessment at
the rate of 60%. Similarly, Section 115A deals with rates of tax on
dividends, royalty and technical service fees in the case of foreign
companies. We do not propose to deal with other sections of this
Chapter but it is suffice to say that all these provisions in the said
Chapter give the rate of tax in respect of certain types of income. We are
not discussing all the provisions of the said Chapter to avoid burdening
39 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
our judgment.
24. Chapter XVII-C deals with payment of advance tax. Section
207(1) provides that advance tax shall be payable in accordance with
the provisions of Sections 208 to 219 in respect of the income
chargeable to tax for the assessment year immediately following that
financial year and said income is referred to as ‘current income’. Section
209 provides for computation of advance tax. Section 209(1)(a)
provides that the assessee shall estimate his current income and income-
tax thereon shall be calculated at the rates in force in the financial year.
Section 210 provides for payment of advance tax by the assessee of his
own accord or in pursuance of an order of Assessing Officer on or
before due dates specified in Section 211 in accordance with the
calculation made in the manner laid down under Section 209. Section
211 provides for various due dates on or before which advance tax has
to be paid.
25. Section 139 provides for furnishing a return of income by a
person in the prescribed form and verified in the prescribed manner and
setting forth such other particulars as may be prescribed. Section 139D
empowers the Board, i.e., Central Board of Direct Taxes to make rules
providing for the class of persons who shall be required to furnish the
return in electronic form, the form and manner in which the return in
electronic form may be furnished and the documents, statements, etc.,
40 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
which may not be furnished along with the return in electronic form but
shall be produced before the Assessing Officer on demand, and the
computer resource or the electronic record to which the return in
electronic form may be transmitted.
26. Various forms are prescribed for different types of assessees
namely ITR-1 for individuals with income less than Rs.50 Lakhs and not
having business or capital gain. Other forms are ITR-2 to ITR-7. The
return of income is mandatorily required to be filed online. Respondent
No.1 annually releases utilities for filing income-tax returns online,
which utilities are generally released before the end of the financial
year. At the same time, return forms are also notified separately. The
purpose of releasing the utility is to enable filing of returns online.
27. There are various types of assessments namely self-assessment,
intimation, scrutiny assessment, best judgment assessment, etc.
28. Section 140A deals with Self-assessment and it provides that
where any taxes are payable on the basis of any return required to be
furnished under the sections specified therein after taking into account
the amount of tax already paid, any tax deducted or collected at source,
any relief of tax claimed under Section 89 or Section 90 or Section 91
or Section 90A, any credit claimed to be set off in accordance with the
provisions of Sections 115JAA or 115JD and any tax or interest payable
41 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
under Section 191(2), the assessee shall be liable to pay such tax
together with interest and fee payable under any provisions of this Act
for any delay in furnishing the return or any default or delay in
payment of advance tax, before furnishing the return and the return
shall be accompanied by proof of payment of such tax, interest and fee.
At this stage an assessee has to compute his income himself as per his
reading of the Act and make payment of tax as per the Act.
29. Section 142 provides for inquiry before assessment. Section
143(1) provides that where a return has been made under Sections 139
or 142(1), such return shall be processed in the manner specified
therein and an intimation is to be issued to an assessee granting refund
or raising the demand or accepting the return as the case may be after
making the adjustments specified in Section 143(1).
30. The adjustments under Section 143(1) consist of arithmetical
error, incorrect claim apparent from records, etc. which are specified in
Section 143(1)(a). Explanation to Section 143(1) defines ‘incorrect
claim’. Section 143(2) provides that the Assessing Officer, if he
considers it necessary or expedient to ensure that the assessee has not
understated the income, or has not computed excessive loss, or has not
under-paid tax shall serve on the assessee a notice requiring him to
attend the office of the Assessing Officer along with evidence on which
the assessee may rely in support of the return. Section 143(3) provides
42 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
for passing the assessment order by an Assessing Officer after hearing
the assessee and considering all the documents produced before the
Assessing Officer by the assessee. Section 144B deals with Faceless
Assessment, which aims to eliminate the direct interface between the
Officer and the assessee during the course of assessment proceedings.
31. The intimation and assessment orders passed are further
subjected to appeals, reassessment and revisional proceedings under
Section 246, 263, 264, 260A, etc. where the difference of views
between assessee and revenue is resolved.
32. Section 143(1A) provides that the Board may for the purposes of
processing returns make a scheme for centralised processing of returns
with a view to expeditiously determine the tax payable by or the refund
due to the assessee.
33. Therefore, on a conjoint reading of Articles 265 and 300A of
the Constitution of India read with Sections 139, 140, 140A, 142 and
143 of the Income-tax Act, the assessee, based on his belief, has to
compute his income in accordance with the provisions of the Act and
arrive at the tax payable which the assessee has to pay along with his
return of income. This is known as self-assessment. The correctness of
self-assessment is examined under Section 143(1) and / or Section
143(3). Therefore, in our view, although the filing of return of income is
43 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
a statutory duty under the provisions of the Act, determination/
computation of income on which tax is payable and computation of tax
thereon by an assessee at the time of filing the return of income must
abide by the Constitutional mandate in Article 265 read with Article
300A of the Constitution of India. This is because the tax can only be
recovered in accordance with the authority of law. There is a distinction
between the statutory duty of filing the return and computation of
income by an assessee and tax payable thereon when the return of
income is filed and the duty of the revenue to assess and recover tax
authorised by the law. Any recovery of tax that does not have the
sanction of the law would not pass the constitutional muster and raise
an issue of revenue transgressing the constitutional boundaries.
34. The assessee must compute his income and pay the tax
thereon. In computing such income, an assessee would arrive at the
income and tax thereon based on his reading and belief in the
provisions of the Income-tax Act. This belief, however, bona fide, may
not always be correct. The correctness of such belief and reading is to
be examined under Section 143(1) and/or by making an assessment by
the Assessing Officer. When filing the income return of income, the
respondents cannot restrain or prohibit an assessee from taking a
particular stand on taxability or determination of tax thereon. At least
the IT Act does not contain any such prohibition. Such a prohibition,
44 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
therefore, cannot be introduced by simply tweaking the utility. The
utility, that is, to aid tax governance should not overtake tax governance
and decide which claim an assessee may make or not. The facility to
raise a claim, which was very much available till 5 July 2024, could not
have been abruptly discontinued simply because the revenue officials,
acting in their administrative capacities, felt that such a claim was
untenable. This is almost like some Court registry declining to accept a
filing because, in the opinion of the filing clerk, the suitor’s suit was
untenable on merits. The access to justice cannot be denied in this
manner.
35. In our view, any such attempt which restricts or prohibits an
assessee from making a particular claim concerning the determination
of income and/or tax payable thereon would be contrary to the scheme
of the Act and would also be unconstitutional since by the said
prohibition or restriction an assessee is prohibited not only from making
a claim, but would also be denied his right to access justice by not
permitting him to test such claim by the process provided under the Act
i.e., assessment, appeal, etc. Any such restriction or prohibition is not
permissible and would be unconstitutional.
36. The Act provides for consequences if the claim made by an
assessee is found to be incorrect or not bona fide. There are sufficient
safeguards in the Act that act as a deterrent if a wrong claim is made.
45 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
For example, payment of penalty, prosecution, payment of interest, etc.
Therefore, looking at the scheme of the Act, restraining/prohibiting an
assessee from making a bona fide claim based on his reading of the said
provisions of the Act would be unfair and arbitrary. In any event, it
cannot be left to the utility to determine whether a claim is legal and
valid and, therefore, should be allowed to be raised at all.
37. The parties are ad idem insofar as the transition from manual
filing and processing of returns to the electronic form of filing and
processing of returns. Undoubtedly, technology must be harnessed for
the efficient administration of the Act by making the administration
easier, faster and with the least interference of human interaction
between the assessees and the authorities under the Act. It is with this
intention and objective that the provisions of Section 144B dealing with
Faceless Assessment is introduced. However, the transition for better
administration by harnessing and adopting technology should not
override the scheme of the Act by which, at the starting point of filing
the return of income under Section 139, an assessee is prohibited from
making a claim since, at that stage, it is he who estimates his income
based on his reading of the provisions of the Act.
38. Assuming that an assessee makes a claim expressly prohibited or
debarred by the Act, there is a provision under Section 143(1)(a) by
which an adjustment can be made to the income of the assessee
46 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
followed by raising the demand along with interest and consequential
penalties/prosecution, etc. The provision of Section 143(1)(a) itself
contemplates and accepts the fact that an assessee may make an
incorrect claim, but in such a scenario the provisions of the Act take
care by disallowing such claim and raising the demand. However, using
technology for filing and processing the return does not empower any
authority under the Act to prevent/restrict an assessee from making a
claim which may not ultimately be found tenable.
39. There is no denying the fact that although the selected few cases
are picked up for scrutiny, every return is certainly processed under
Section 143(1) of the Act, in which case certainly the incorrect claim is
expressly barred by the Act could be added to the total income. Merely
because few selected cases are picked up for scrutiny does not mean
and would not authorise any authority under the Act to prevent an
assessee from making the claim on which more than one view is
possible. The circumstance that only a few cases are selected for
scrutiny applies across the board. There are bound to be instances
where an assessee’s claims may not be tenable but have escaped
scrutiny because of the policy adopted and applied across the board.
But, this cannot be a ground to tweak the utility to prevent at the very
threshold, an opportunity to raise a claim on a debatable issue based
upon the interpretation of the provisions in Section 87A and 115 BAC of
47 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
the IT Act.
40. The claim we are concerned about in the present proceedings
is under Section 87A. It is the contention of the petitioners that the
rebate under Section 87A is to be allowed not only from the tax
computed under Section 115BAC but also from the tax computed
following other provisions of Chapter XII of the Act unless such other
provisions expressly debar them from making the claim. This is on the
basis that the total income consists of an aggregate of various Heads of
income and the total tax payable is to be determined in accordance with
Chapter XII. According to the petitioners, the total income cannot be
split into two parts viz., total income, which would consist of income
covered by provisions of Chapter XII other than Section 115BAC, and
the total income referred to in Section 115BAC. The total income is the
aggregate of the income referred to in Section 115BAC and the other
incomes referred to in Chapter XII and it is the aggregate of the two on
which taxes are to be determined, and such total taxes are to be
determined by applying the provisions of special rates provided in
Chapter XII and Section 115BAC or the Finance Act. It is the contention
of the petitioners that Chapter XII provides for special rates of tax in
respect of certain types of income and rates of tax with respect to
income other than those specified in other sections of Chapter XII. The
phrases “subject to the provisions of this Chapter” and “notwithstanding
48 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
anything contained in this Act” used in Section 115BAC(1A) only
override the ‘rate of tax’ provisions and do not split the total income
into two parts. This would also be contrary to the definition of ‘total
income’ under Section 2(45) of the Act. The learned senior counsel
submits that wherever the legislature wanted to deny the benefit of
Section 87A to a particular type of income specified in Chapter XII, the
same has been provided. The only section with such prohibition is
Section 112A(6) and no other section. It is, therefore, the contention of
the petitioners that the assessees are entitled to the rebate under
Section 87A from the aggregate of the tax determined under all the
provisions of Chapter XII except Section 112A(6). The learned senior
counsel further submits that Section 115BAC(2) provides that the total
income shall be computed without claiming any exemption or
deduction, or without setting off of any loss, or depreciation, or without
claiming any exemption or deduction under any other law for the time
being in force. Insofar as provisions of Section 87A are concerned, the
same is not specified in sub-section (2) of Section 115BAC. The learned
senior counsel, therefore, submits that based on such an interpretation
of Section 115BAC and 87A and the scheme of the Act, the claim
proposed to be raised by an assessee cannot be said to have been
prohibited expressly by any of the provisions of the Act, and therefore,
an assessee is entitled to atleast make a claim which later on can be
subjected to adjudication as per the provisions of the Act, but
49 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
prohibiting/restraining an assessee to make a claim at the threshold of
filing the return would undoubtedly be unconstitutional and contrary to
the provisions of the Act.
41. Per contra, the learned Additional Solicitor General submits
that based on the intention of introduction of Section 115BAC, which
deals with giving up of all the deductions, exemptions and simplifying
the taxation and thereby encouraging the assessees to pay tax at lower
rate, a rebate under Section 87A can be given only from the tax
determined under Section 115BAC and not from the tax under any
other provisions of Chapter XII. The learned ASG submits that on a
reading of the proviso to Section 87A, it clearly provides that the rebate
would be granted from the total income of an assessee which is
chargeable to tax under Section 115BAC(1A) and not from any other
section provided in Chapter XII of the Act. According to the learned
ASG, the total income referred to in Section 87A would consist of total
income chargeable to tax under Section 115 BAC(1A) and on a reading
of the proviso to Section 87A rebate is allowable only from the tax on
the total income computed under Section 115BAC(1A). It is his
contention that sub-section (1A) of Section 115BAC is an overriding
provision but subject to the provisions of Chapter XII and, therefore, it is
his contention that rebate under Section 87A cannot be granted from
the tax specified in other sections of Chapter XII other than Section
50 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
115BAC. Therefore, it is his contention that the form prescribed is in
accordance with the provisions of the Act and there is no need to seek
prayer for modification of the utility.
42. In our opinion, whether a rebate under Section 87A can be
granted only from the tax arrived at under Section 115BAC or also from
the tax computed under other provisions of Chapter XII is a highly
debatable and arguable issue. This would require interpreting various
provisions of Chapter XII and Section 87A of the Act. In our view, after
hearing the arguments of the learned senior counsel and the learned
ASG, we cannot say that the provisions of the Act are so crystal clear as
to arrive at a definite conclusion that a rebate under Section 87A cannot
be granted from the tax computed under other provisions of Chapter
XII. Though the learned senior counsel for the petitioners and the
learned ASG argued the matter for four hours each, we were
unconvinced that either of the contentions was not even debatable or
would admit to only one conclusion. In such a case, in our view,
certainly, the respondents cannot restrain or prohibit an assessee from
claiming Section 87A by modifying their utility by which an assessee is
forbidden at the threshold itself from making such a claim. Certainly,
such a claim whether eligible or not can be examined in the proceedings
under Section 143(1), Section 143(3), etc. Merely because many
returns are required to be processed and only a few of them are selected
51 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
for scrutiny, it cannot be grounds to prohibit an assessee from making a
debatable and arguable claim. In any event, considering the mandates
of Articles 265 and 300A, ends, howsoever laudable, cannot justify
means.
43. Assuming that the legal provisions are ambiguous, the revenue
cannot resolve such ambiguity by adopting an interpretation favouring
itself through the device of simply tweaking the utility and preventing
the assessee from even raising a claim. Therefore, the main question is
not whether the interpretation proposed by the learned counsel for the
petitioners or that proposed by the learned ASG is correct, but the main
question is whether the revenue can insist that its interpretation prevails
or triumphs because it has the capacity to and has exercised this
capacity to tweak the utility and prevent an assessee to even raise a
debatable claim. The provisions of the IT Act do not permit the revenue
to do this without transgressing the constitutional boundaries.
44. On a reading of paras 3, 4(a), 8, 9, 10, 13(a), 13(b), 16, 19 and
20 of respondents’ written submissions, which we have reproduced
earlier, itself shows that it is by the interpretative process of various
provisions of the Act and by applying various techniques and canons of
interpretation, respondents are seeking to justify their action. Based on
these submissions, the issue raised for our consideration on the claim
under Section 87A is, at best, highly debatable and contentious.
52 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
Therefore, the revenue would not be justified in assuming that its
interpretation is open and shut, and based upon such a conclusion, shut
out bona fide claims for rebate under Section 87A. At least, all this
cannot be done by exercising administrative powers instead of quasi-
judicial powers. Disputed claims, except to the limited extent explicitly
permitted by the law, cannot ordinarily be disposed of by the executive
acting in its executive capacity. This is more so when the executive is
itself a party to the Lis. One of the foundations of our Constitution is the
Rule of Law. This posits that all three organs of governance, the
Legislature, the Executive, and the Judiciary function under and in
accordance with the law as enshrined in our Constitution.
45. Technology is meant to eliminate the interface between the tax
authority and the assesses. Technology quite admirably reduces the
scope of arbitrariness and abuse of discretion in choosing cases to be
scrutinized. The shift to a system where face value or other extraneous
considerations are attempted to be eschewed is undoubtedly welcome.
Still, this cannot eliminate an assessee’s right to raise a claim for some
benefit that she bona fide believes the law has granted her or about
which a debate is possible. By doing this, the assessee is merely insisting
that the Revenue recovers tax in accord with the law and under the
authority of the law. Any such inhibition would be violative of Article
265 read with Article 300A of the Constitution of India and of the
53 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
holistic reading of the scheme of the Act, which provides for
adjudication and appeals.
46. Article 265 of the Constitution of India provides that taxes shall
not be imposed save by authority of law. Article 300A provides that no
person shall be deprived of his property save by authority of law. How
much tax a person is required to pay is governed by the provisions of
the Income-tax Act. A single rupee over and above what is liable under
the Income-tax Act, if collected would be violative of Articles 265 and
300A of the Constitution of India since such a collection will be without
the authority of law under Article 265 r/w Article 300A and would
consequently deprive a person of his property in the form of collection
of tax in monetary terms without only authority of law.
47. Whether collection of tax is by authority of law must be examined
in accordance with the provisions of the Income-tax Act. Under the
scheme of the Income-tax Act a person has to estimate and compute his
income and make payment of tax which the authorities will verify under
the Act. If by any act of the authorities under the Income-tax Act, any
person is deprived or restrained from computing his income by denying
a person to raise a claim, same would be contrary to the provisions of
the Act and the Constitution of India. It would be like putting a cart
before the horse.
54 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
48. Respondents did not show any provision under the Income-tax
Act which expressly debars an assessee to raise or make the claim under
Section 87A qua the tax computed at the rates specified in the
provisions of Chapter XII other than Section 115BAC. If that be so, then
certainly one cannot accept the argument that the respondents’ case is
crystal clear. There was no rebuttal to the petitioner’s contention that a
provision like Section 112A(6) has been expressly enacted wherever the
legislature intended to deny such a benefit. Therefore, in our view,
insofar as the prayers of the petitioners are concerned that the utility
should permit an assessee to at least make a claim under Section 87A of
the Act, it cannot be rejected at the threshold.
49. In our view and after hearing the learned senior counsel for the
petitioner and the learned ASG, whether rebate under Section 87A is to
be allowed only on the tax calculated in accordance with the provisions
of Section 115BAC or also on taxes calculated under other provisions of
Chapter XII would require interpretation of the interplay of Section 87A
and Section 115BAC. To what extent the overriding provisions
contained in Section 115BAC(1A) would result in allowability or denial
of rebate under Section 87A will have to be examined by interpretative
process. Similarly, the impact of the phrase ‘subject to the provisions of
this Chapter’ would also have to be examined along with other
provisions for adjudicating the claim under Section 87A of the Act.
55 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
50. What is the purport of the proviso to Section 87A on the claim
proposed to be made will have to be interpreted in conjunction with the
provisions of Section 115BAC(1A) and other connected sections. How
the phrase ‘total income’ should be construed for Section 87A and
Section 115BAC along with the definition sections, charging sections
and scope of total income and the scheme of the Act, will have to be
examined. Whether the provisions of Section 115BAC restrict itself only
to tax rates or computation of total income will also have to be
examined.
51. In our view, if the above exercise is required to be undertaken
before coming to a definite conclusion as to whether the rebate under
Section 87A is to be granted or denied on the tax computed under the
provisions of Chapter XII other than Section 115BAC, then this is
something which has to be deduced by interpretative and adjudicating
process. We cannot accept the submission of the learned ASG that the
provisions of Section 87A and Section 115BAC are so crystal clear that
there is no conclusion other than what is canvassed by the respondents.
Based upon such a conclusion, the revenue was not justified in
modifying the utility from 5 July 2024, by which an assessee is debarred
at the threshold from making the claim, which claim, according to us,
is, at best, a contentious or debatable claim.
52. We may observe that the law of taxation is an ever-evolving
56 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
jurisprudence which has led to controversies on every section and sub-
section of the Act to such an extent that it is considered to be one of the
most complex Acts. Therefore, some professionals acquire domain
expertise that specialises only in taxation laws. It is not that in every
case the interpretation canvassed by an assessee or the department is
bound to be correct except by undergoing the process of adjudication,
appeals, etc. If the respondents’ stand is to be accepted, then in our
view and more so on the facts of the present case and provisions with
which we are concerned, the statutory remedies available under the Act
would be rendered redundant and infructuous. We once again make it
clear that we have not examined whether the stand of the revenue or
the petitioners is correct, but certainly at least for the purpose of
whether to permit an assessee to make a claim or not is an issue, which
cannot be thrown away at the threshold by the respondents by simply
tweaking the utility.
53. Section 87 which provides for rebate under Section 87A from the
amount of income-tax uses the phrase ‘there shall be allowed from the
amount of income tax….’. The proviso to Section 87A uses the phrase
‘…. assessee shall be entitled to a deduction….’ . In our view, a
combined reading of Section 87 and Section 87A would mean an
assessee has to make a claim, the entitlement of which is to be
examined by processing the return under Section 143(1)/143(3) etc.
57 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
and the same should be allowed as a deduction from the amount of
income-tax. If a claim is not made, then it may well be argued by the
revenue that the same cannot be allowed.
54. The extent of issue being arguable is apparent and obvious from
reading of the written submissions of the petitioners and respondents,
which we have reproduced earlier. After going through the same, we
have no iota of doubt that this is not a case where, at the threshold, an
assessee should be shown the door. Still, it is a case where the assessee
and revenue should enter the arena, fight with equal might, and leave it
to the Umpire to decide who is right and the winner of the game.
55. Section 139D of the Act provides for filing of return in electronic
form and authorises the Board to make rules for class of persons who
are required to file return in electronic form, the form and manner in
which such returns are to be furnished, documents which are not
required to be furnished along with return and computer resource to
which such return may be transmitted. Pursuant to this, under Rule 12
of the Income-tax Rules various forms are prescribed. In our view,
Section 139D, read with Rule 12, does not empower the authorities to
design the form on the basis of their reading of law or provisions which
debar an assessee from making a claim at the threshold itself.
56. The importance of making a claim in the return of income is
58 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
enunciated by the ratio of the decision of the Supreme Court in the case
of Goetze (I) Ltd. Vs CIT1 wherein the argument of an assessee to
permit him to make a claim by way of a letter without making a claim
in the return or by filing revised return was rejected. This highlights the
importance of making a claim in the return of income itself. Any
attempt to deny an assessee to make a claim in the return of income
which he believes to be bona fide would deny him to pursue his claim
under any provisions of the Act because the starting point is the return
of income.
57. The scheme of the Income-tax Act also guides us in the direction
that a claim must be made in the return of income. Section 80AC
provides for deduction not to be allowed unless the assessee furnishes
the return of his income. Therefore, looking at the scheme of the
Income-tax Act as a whole, the claim cannot be denied from being made
by modifying utilities, which prohibits an assessee from raising a claim
in the return of income at the threshold itself.
58. We may draw support based on the observations made by various
Courts for arriving at our aforesaid analysis and conclusions:
(a) In the case of ‘Commissioner of Income Tax Vs Ranchhoddas
Karsondas’2, the Supreme Court made the following observations with
respect to taking cognizance of a return filed which was below the
1 284 ITR 323
2 (1959) 36 ITR 569 (SC)
59 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
taxable limit;
It is a little difficult to understand how the existence of a return can
be ignored, once it has been filed. A return showing income below the
taxable limit can be made even in answer to a notice under section
22(2). The notice under section 22(1) requires in a general way what
a notice under section 22(2) requires of an individual. If a return of
income below the taxable limit is a good return in answer to a notice
under section 22(2), there is no reason to think that a return of a
similar kind in answer to a public notice is no return at all. The
conclusion does not follow from the words of section 22(1). No
doubt, under that sub-section only those persons are required to make
a return, whose income is above taxable limits, but a person may
legitimately consider himself entitled to certain deductions and
allowances, and yet file a return to be on the safe side. He may show
his income and the deductions and allowances he claims. But it may
be that on a correct processing his income may be found to be above
the exempted limit. No doubt, it is futile for a person not liable to tax
to rush in with a return, but the return in law is not a mere scrap of
paper. It is a return, such as the assessee considers represents his true
income.
(b) In the case of ‘Samir Narain Bhojwani Vs Deputy Commissioner of
Income Tax’3, the Co-ordinate bench of this Court had an occasion to
consider whether electronic filing of return of income can deny an
assessee to reflect his claim in the online return form, under Section 72
of the Act. In Para 8, the Court observed as under ;
8. The purpose and object of e-filing of return to have simplicity and
uniformity in procedure. However, the above object cannot in its
implementation result in an assessee not being entitled to make a
claim of set off which he feels he is entitled to in accordance with the
provisions of the Act. The allowability or dis- allowability of the claim
is a subject matter to be considered by the Assessing Officer. However,
the procedure of filing the return of income cannot bar an assessee
from making a claim under the Act which he feels he is entitled to. We
accept the Assessing Officer’s submission that in terms of Rule 12 of
the Rules, the returns are to be filed by the petitioner only
electronically and he is bound by the Act and the Rules, thus cannot
accept the paper return. However, in terms of section 139D of the Act,
it is for the CBDT to make rules providing for filing of returns of
3 (2020) 115 taxmann.com 70 (Bombay)
60 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
income in electronic form. This power has been exercised by the
CBDT in terms of Rule 12 of the Rules. However, the form as
prescribed do not provide for eventuality that has arisen in the
present case and may also arise in other cases. Thus, this is an issue to
be brought to the notice of the CBDT, which would in case it finds
merits in this submission, issue necessary directions to cover this gap.
(c) The Allahabad High Court in ‘ CIT Vs. N Khan’4, in the context of
penalty made following observation with respect to the right of an
assessee while filing the return of income.
Now, under section 139(1) a duty is cast upon every person to file a
voluntary return if his income exceeds the maximum amount which is
his chargeable to income-tax. The question arises as to which income
is contemplated by this provision, the income which the assessee
believes to be his income or which is finally assessed by the Income-
tax Officer. It is clear that at the time when a person is required to file
a voluntary return, no assessment has yet been made against him. He
is thus to be guided by what he himself believes to be his income. It is
possible and it happens very frequently that an assessee may not
consider a particular item to be his income and yet the Income-tax
Officer may hold otherwise. In such a case, if what he considers to be
his income is less than the amount which is not chargeable to income-
tax, he is not required to file a voluntary return even if the income
finally assessed is more than the maximum amount which is not
chargeable to income-tax. Of course, the belief of the assessee must be
bona fide. In the instant case, the total income assessed by the
Income-tax Officer includes a sum of Rs. 40,000 on account of
unexplained cash credits. These cash credits could not be considered
by the assessee to be its income. According to the assessee, they
represented loans. During the course of assessment proceedings the
assessee surrendered this amount for inclusion in its income but the
Tribunal has found that the surrender was made because the assessee
found itself unable to produce evidence which could satisfy the
Income-tax Officer. In these circumstances it cannot be said that the
assessee itself should have treated the cash credits to be its income. As
has been rightly pointed out by the Tribunal the fact that the
Inspecting Assistant Commissioner of Income-tax had absolved the
assessee of the charge of concealment with respect to the cash credits
during the course of proceedings for levy of penalty under section
271(1)(c) goes a long way to show that the belief of the assessee that
cash credits were not items of taxable income was bona fide one.
4 (1973) 92 ITR 338 (Allahabad)
61 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
Thus, the sum of Rs. 40,000 must be deducted out of the income
assessed to find out if the balance was still more than the maximum
amount not chargeable to income-tax. Now, after deducting Rs.
40,000 the balance is less than Rs. 25,000 which is the maximum
amount not chargeable to income-tax in the case of a registered firm.
Clearly, the assessee was under no obligation to file any voluntary
return under section 139(1) of the Act, and, as such, was not liable to
any penalty under section 271(1)(a).
(d) The above view expressed by the Allahabad High Court in the case
of N.Khan (Supra) was reiterated by the Calcutta High Court in the
case of ‘CIT Vs. Aminchand Payarelal Ltd’5 wherein the High Court in
para 14 observed as under;
Section 139(1) of the Act provides that an assessee has to file a return
within the time prescribed therein if his total income during the
relevant previous year exceeded the maximum amount which is not
chargeable to income-tax. In this case, the contention of the assessee
was that as it had suffered loss and also ultimately filed a loss return
and, accordingly, there is justification for not filing the return within
the time specified under section 139(1). The income contemplated
under section 139(1) which imposes a duty on a person to file a
voluntary return is the income which the assessee believes to be his
income and not the income which is finally assessed. In such a case, if
what the assessee considers to be his income is less than the
maximum not chargeable to tax, he is not required to file a voluntary
return. Even if, ultimately, his income is assessed at a figure which is
taxable, he may not be liable for penalty under section 271(1)(a). To
that extent, the Tribunal is right in principle. The holding of a bona
fide belief of an assessee that his income is less than the maximum
not chargable to tax is essentially a question of fact. Merely because
the accounts disclosed a loss, it could not be a bona fide ground for
not filing a return under section 139(1). According to accountancy
principles, there may not be profit/but from the point of view of
taxation, there may be profit having regard to the exclusion or
inclusion of certain items of income and expenditure.
(d) The Delhi High Court in the case of CIT Vs. DCM Ltd.6 authored by
His Lordship Sanjiv Khanna J., (as he then was) observed that law does
5 1989 SCC OnLine Cal 334
6 (2013) 359 ITR 101
62 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
not bar or prohibit an assessee from making a claim, which he believes
may be accepted or is plausible.
59. We may also observe that in the course of the hearing, our
attention was drawn by both the learned senior counsel and the learned
ASG to the subject matter of Writ Petition No.3565 of 2023 in the case
of Lupin Ltd. Vs DCIT wherein the assessee was prevented from making
the claim of deduction based on the Supreme Court decision since
electronic mode of filing the return was not permitting the assessee to
do so. On a writ petition being filed and on a direction by this Court, a
manual return was permitted to be filed for making the said claim. We
were informed that while processing the manual return, the claim of the
assessee was accepted. We are referring to this decision for the limited
purpose to bring our point in support of our analysis that certainly the
utility cannot be designed to prevent an assessee from making a claim
which subsequently by adjudication and appeal process may be found to
be correct.
60. The co-ordinate bench in the case of Tata Sons Pvt. Ltd. Vs DCIT
in Writ Petition No.3109 of 2022 also permitted the assessee to file
paper return which came to be processed and thereafter an appeal
against such processing was filed by the assessee. This decision is also
relied upon to the limited extent that the online system did not provide
63 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
to make a claim which was permitted by paper return and processed
accordingly.
61. Therefore, it is not that an assessee can be debarred from making
a claim in the return of income whether online or manual.
62. We may, however, clarify that if any such claim is made, the
revenue would certainly be free to examine the same as per the
provisions of the Act. Both the revenue and the assessee have remedies
under the Act for testing the validity of such a claim. We, however,
refrain from expressing any views on whether the submissions made by
the learned senior counsel for the petitioners or the learned ASG are
correct since that would be something which has to be examined by the
quasi-judicial authorities under the Act in the first instance and not by a
writ court in its exercise of extraordinary jurisdiction.
63. Insofar as the prayer clause (c) of the petition is concerned,
we are afraid that such an omnibus and vague prayer in the absence of
any concrete case before us cannot be granted. We agree with the
learned ASG that unless there is a demand for justice which has been
rejected or a failure on the part of the revenue to exercise its duty under
the Act, such a writ as prayed for in prayer clause (c) cannot be
granted. We also agree with the learned ASG that unless there is some
concrete instance, the Court should grant no relief in such broad and
64 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
general terms. Such reliefs, in general terms, are typically not to be
granted because the ramifications would be unclear. For the present, we
do not propose to consider relief in terms of the prayer clause (c) of the
petition by leaving the question open.
64. Because of the above, we pass the following order: –
ORDER
(i) Rule is made absolute in terms of prayer clause (a) which
reads as under: –
(a) that this Hon’ble Court be pleased to issue a writ of
mandamus or a writ in the nature of mandamus or any other
appropriate writ, direction or order directing the Respondents
to modify the utilities for filing of the return of income under
section 139 of the Act immediately, thereby allowing assessees
to make a claim of rebate under section 87A of the Act read
with the proviso to section 87A, in their return of income for the
AY 2024-25 and subsequent years including revised returns to
be filed under section 139(5) of the Act.
(ii) Since we have allowed prayer clause (a), prayer clause
(b) does not survive, which deals with filing a manual
return of income for claiming a rebate under Section
87A.
(iii) Prayer clause (c) is not adjudicated upon and would be
considered in an appropriate case as and when the need
arises.
(iv) The issue of adjudication of eligibility of a claim under
Section 87A is left to the authorities under the Act while
65 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
processing the returns filed by the assessees.
(v) Prayer clause (e) is rejected, with liberty to the assessee
to avail of the remedies available under the Act.
(vi) Prayer clauses (f) and (g) deal with interim and ad-
interim reliefs, and since we have finally disposed of the
petition, the same would not survive. The interim orders
are now made absolute.
65. The rule is made absolute in the above terms with no order
regarding costs.
66. Before parting, we acknowledge the assistance rendered by Mr.
Pardiwala, the learned senior counsel for the petitioner and Mr.
Venkatraman, the learned ASG, in finally disposing of the present
petition. Their assistance was great, and their fairness to each other and
this Court was even greater.
(Jitendra Jain, J.) (M. S. Sonak, J.)
66 of 67
::: Uploaded on - 24/01/2025 ::: Downloaded on - 25/01/2025 10:25:25 :::
Revati 9.PIL.32465.24.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
PUBLIC INTEREST LITIGATION (L) NO.32465 OF 2024
Judgment delivered on : 24 January 2025
For Approval and signature
The Honourable Justice M. S. SONAK
AND
The Honourable Justice JITENDRA JAIN
1. Whether the Reporters to the Local )
papers may be allowed to see the )
judgment ? )
2. To be Reported or not ? )
3. To be referred to the other )
Benches of the High Court )
67 of 67
::: Uploaded on – 24/01/2025 ::: Downloaded on – 25/01/2025 10:25:25 :::